Bookkeepers and accountants both keep records. They both know about accounting. Sometimes, a bookkeeper might handle some accounting duties, and sometimes, an accountant might do some bookkeeping. So they’re essentially the same, right?
Not really. Despite their similarities, bookkeepers and accountants do have different jobs. And recognizing the distinction doesn’t just help you better understand accounting professionals it can help you better understand accounting, and what you need to know to assess the financial health of your business.
Bookkeepers keep the books.
A bookkeeper is in charge of maintaining accurate financial records. Bookkeeping requires a basic knowledge of accounting, but it doesn’t require extensive training-most bookkeepers just have a certificate or an associate’s degree, or even just a high-school diploma.
They keep track of financial transactions. The greatest part of a bookkeeper’s job is to maintain an ongoing chronological record known as the general ledger of purchases, receipts, sales, and payments. Updating the ledger is a daily (or at least several-times-weekly) process.
They also facilitate transactions. A business’s bookkeeper is also responsible for producing and sending invoices, paying incoming bills and invoices, tracking down late payments, and managing payroll, to keep cash flowing in and out where and when it’s supposed to.
Some bookkeepers do a little bit more. Some smaller companies that don’t have in-house accountants will fill some basic accounting needs by hiring a full-charge bookkeeper. Full-charge bookkeepers perform the same tasks as regular bookkeepers, but with the help of accounting, software-they’re also able to classify financial data and assemble reports. They still lack the training to handle more complicated analyses, but a full-charge bookkeeper can handle those smaller tasks without bringing in additional, more expensive staff.
Accountants analyze the accounts.
Accountants take the books prepared by the bookkeepers and turn that data into usable information. This requires a certain amount of training in the U.S., a CPA (certified public accountant) comes with a bachelor’s degree, experience under a licensed CPA, and a passing score on the CPA exam. Outside of the U.S., you may run into a chartered accountant (CA or ACA) or certified chartered accountant (ACCA), who have similar qualifications and perform the same jobs.
They interpret, classify, analyze, summarize, and report. The main job of an accountant is to look at a company’s financial data and determine what it says about the company’s financial status. They analyze all of the import figures and indicators and then assemble their findings into reports that paint the financial big picture.
They prepare tax returns. Business tax returns can be far more complicated than your standard 1040EZ. The U.S. tax code is over 4,000 pages long it’s an accountant’s job to understand it all, to accurately report revenue, deductions, and losses and avoid audits.
They answer and advise. With all of that information plus industry knowledge at hand, an accountant is frequently able to advise business owners on their financial status and help with strategic planning. They can develop forecasts, detect trends, identify opportunities for growth, make suggestions for cash management, and help owners make informed decisions essentially acting like an outsourced CFO.
Which one do I need?
To keep your business financially healthy, it needs the services of both a bookkeeper to keep day-to-day records and an accountant to handle analysis and offer advice. It doesn’t necessarily have to be a full-time, in-office arrangement, but a part-time bookkeeper and the occasional guidance of an accountant can make a huge difference in a company’s profitability and success.
Of course, many business owners can handle their own basic bookkeeping tasks with the help of software. But the more complex a business is in terms of assets, the amount of inventory, the number of employees, and industry regulations the more likely they are to need outside help from an expert. And at tax time, or when preparing for a major development, most business owners discover that they can’t afford, not to bring in an accountant. As different as they are, bookkeepers and accountants have one thing in common: Spending a little money on them now can prevent a whole lot of extremely expensive problems in the future.