Bookkeeping and accounting are often thought of and referred to interchangeably, but they're not the exact same thing. While financial professionals may offer both services, you'll need to determine which services your business actually needs and whether you should hire someone to handle both of these important tasks.
When searching for an accountant or bookkeeper, it's important to note the differences in their services as well as how these specific services can benefit you and your business.
Here are the roles of bookkeepers and accountants, and which is better for your business.
[Read more: 10 Free Accounting Tools for Your Small Business]
What is a bookkeeper?
A bookkeeper is someone who records a business’s daily transactions in a ledger. This is a document in which a bookkeeper records sales and expense receipts, which is a process called “posting.” A ledger can be done in a specific software, on a spreadsheet or even just on a piece of paper. The complexity of the ledger depends on the size of the business and the number of transactions it has.
Aside from maintaining a business’s ledger, here are the common responsibilities of a bookkeeper:
- Recording a business’s financial transactions.
- Posting all debts and credits.
- Creating and sending invoices.
- Managing the company's payroll.
- Maintaining and bouncing the general ledger.
Unlike accountants, bookkeepers do not need any specialized certification to handle a business's finances. There is, however, special licensing through both the American Institute of Professional Bookkeepers (AIPB) and the National Association of Certified Public Bookkeepers (NACPB). While not required, these licenses provide a sense of credibility to bookkeepers.
What is an accountant?
Accountants are typically responsible for financial analysis and business insights for a company. They look at the bigger picture for a company’s finances. With the data collected from bookkeepers, accountants create reports that suggest insights for how a company should handle its business. The day-to-day responsibilities of accountants can include:
- Analyzing and verifying financial data.
- Creating financial reports.
- Performing audits.
- Preparing financial records such as tax returns, income statements and balance sheets.
- Creating financial forecasts.
- Advising owners with financial decisions.
- Adjusting entries.
At a minimum, an accountant must have a bachelor’s degree in accounting from an accredited college or university. To become a certified public accountant (CPA), an accountant must meet the requirements of the state they reside in and pass the Uniform CPA exam.
[Read more: 6 Common Accounting Mistakes and How to Avoid Them]
There are some circumstances for which it is better to hire a full-time professional to assess your finances, whether that’s a bookkeeper or an accountant.
Does your business need a bookkeeper and an accountant?
Every business, big or small, needs someone to handle its financial obligations. Determining whether to hire a bookkeeper or accountant depends on the scope of these obligations. Many smaller companies and startups do their bookkeeping on software that is recommended by accountants. They then have an accountant as a consultant review their books and ledgers every week, month or quarter to analyze the financial data. From there, the accountant can advise business owners on how to spend, save and scale.
Accounting and bookkeeping are both tasks that do not need to be completed within the office. If your business can afford to do so, it may be beneficial to outsource your accounting or bookkeeping. For entrepreneurs and small business owners, this frees up your time allowing you to focus on tasks more relevant to the overall business. In addition, this puts financial support in the hands of experts, as opposed to having someone at the company learn these skills on the fly. Outsourcing these services also saves you from hiring a full-time in-house employee for these roles.
There are some circumstances for which it is better to hire a full-time professional to assess your finances, whether that’s a bookkeeper or an accountant. If your taxes are complex and include managing multiple income streams or foreign investments, it's best to hire an accountant who can keep you up-to-date. It's also advisable to hire an accountant if you find your business is experiencing rapid growth. You may no longer be able to handle the scale of the financial duties on your own, and an accountant can oversee your growth and make sure you're financially responsible and not growing too fast.
No matter the size of your business, it's important to consider hiring a bookkeeper or accountant, or both, so your finances are covered and managed by a professional.
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