When most people hear the terms “bookkeeping” and “accounting,” they’re likely to use the two interchangeably. And, to an extent, this makes sense. After all, bookkeepers and accountants have similar goals: often, they will both support your business in different stages of the financial cycle. Yet, there are some differences between the two. Let’s discuss.
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What Does a Bookkeeper Do?
Bookkeepers have been around since the dawn of commerce; their job is to maintain complete records of all money coming and out of a business. In addition to recording daily transactions, other typical bookkeeping tasks include:
- Recording financial transactions
- Posting debits and credits
- Producing invoices
- Managing payroll
- Maintaining and balancing ledgers, accounts, and subsidiaries
Bookkeepers are not required to have any formal education however, individuals must be knowledgeable about financial topics, have strong attention to detail and strive for accuracy. Bookkeepers are not considered accountants but are generally overseen by an accountant of the small business owner they are working for.
Bookkeeping and Accounting have similar goals, but are ultimately different jobs.
What do Accountants do?
Accounting is a high-level process that uses the financial information compiled by the bookkeeper or business owner and then produces financial models using the information. Compared to bookkeeping, which is more transactional, accounting is much more subjective.
Accountants are responsible for:
- Preparing adjusting entries or recording expenses that have occurred within the business but aren’t yet in the books
- Analyzing the cost of the business operations
- Preparing the company’s financial statements
- Completing income tax returns
- Assisting the business owner when it comes to financial decisions
The accounting process allows for key financial indicators to come into play such as understanding profitability, expenses and cash flow. An accountant’s job is to turn the information from the ledgers into financial statements to reveal the current path of the business and big picture decisions.
Accountants must have a bachelor’s degree in accounting but finance degrees are also an acceptable substitution. Accountants are also eligible to earn professional certifications such as the title of Certified Public Accountant (CPA) by passing the Uniform Certified Public Accountant exam and possess the experience and expertise to do so.
Which do you Need for Your Business?
After outlining the basis of each role, it is easy to see how there would be some overlap between the two. Both bookkeepers and accountants have a common goal and that is to assist and provide strategic advice to their clients. A bookkeeper may be able to assist with budgeting and streamlining the accounting process while accountants can assist more heavily with taxes and deciding what type of enterprise your business should be.
When starting a business, consulting with a qualified accountant is among the first steps to ensure all of the boxes get checked. A qualified accountant can assist business owners with entity types, tax filing requirements and offer advice for maximizing profits and minimizing your liability. Depending on the size and scope of your business, you may be able handle daily bookkeeping tasks on your own with the help of your accountant.
Whether you choose to do it yourself or hire both an accountant and bookkeeper, as a business you will have more success if you have a complete understanding of your finances. The two roles work hand in hand with the goal to help the business owner become more successful so you can focus doing what you love – running your business.
