As a small business owner, you probably wore all the hats in the beginning. But as your business has grown, so has the need for more help when it comes to staying on top of your finances.
When you decide it’s time to hire some help, do you look for a bookkeeper or an accountant? And what’s the difference?
Bookkeeping vs accounting has been confusing for plenty of people over the years. It may seem like the two are interchangeable, but there are distinct differences that you need to know about so you make the best decision for the future success of your growing company.
Bookkeeping vs Accounting
For many small business owners, bookkeeping and accounting seem like the two words for the same task at first glance. However, they aren’t the same.
And you could make a really frustrating mistake if you just rush out and hire someone out of financial desperation. You could get an accountant when all you need is a bookkeeper (paying for more than you need), or you could bring in a bookkeeper when what you really need is an accountant (not enough to do what really needs to be done).
This post will help you understand the differences between bookkeeping and accounting so that you can avoid wasting valuable time and spending money unnecessarily.
Is Bookkeeping The Same As Accounting?
The short answer is “no.” But we need a little bit more than that to understand the differences completely.
Xero.com has a great definition of the difference between bookkeeping and accounting. They say, “Bookkeeping focuses on recording and organizing financial data. Accounting is the interpretation and presentation of that data to business owners and investors.”
A bookkeeper is responsible for accurately maintaining the data that an accountant can then use to help you analyze your financial situation.
And from a certification standpoint, an accountant can be a bookkeeper but a bookkeeper cannot be an accountant. That distinction is worth noting depending on what level of financial expertise you are needing in your business.
There are organizations such as the American Institute of Professional Bookkeepers and the National Association of Certified Bookkeepers that help with licensing and accreditation when it comes to bookkeepers. Still, there are no formal educational requirements related to the role. These organizations simply allow individual bookkeepers to set themselves apart from the crowd and demonstrate their dedication to the job.
To be an accountant, on the other hand, one must typically have a college degree in accounting or finance in order to claim the title. (Certified Public Accountants, or CPAs, go a step further to take on additional training and pass a difficult national exam.)
It isn’t unusual in the finance world for someone to “get their foot in the door” as a bookkeeper, then work their way up to being an accountant as they gain the necessary education and experience.
What Does a Bookkeeper Do vs Accountant?
Bookkeepers and accountants often work side-by-side. Generally speaking, while a bookkeeper pays attention to the day-to-day transactions of a business, an accountant focuses on the bigger picture of the company’s overall financial health.
In a typical company, a bookkeeper is responsible for
- recording transactions
- posting debits and credits to the general ledger
- creating invoices
- posting payroll
- maintaining all accounts and record books
Their primary purpose is to provide accurate data entry, bank account reconciliation and assist in the creation of monthly reports that help business owners understand the company’s financial status.
An accountant in most businesses is responsible for
- overseeing the work of bookkeepers
- checking and analyzing financial data
- creating financial statements such as P&Ls, cash flow reports, and balance sheets
- preparing tax returns
- assisting the owner of the business with financial decisions
As the folks at Xero point out, the question isn’t “What can accountants do?” Instead, it should be “What can’t accountants do?” Here are a few of the “14 things you didn’t know an accountant could do” that they write about:
- Help you launch a startup. It takes money to start a business, and it takes good money management to keep one going. Who better to team up with when you’re starting a new venture than an accountant who eats and breathes numbers all day?
- Write winning loan applications. Accountants understand what banks and other lenders are looking for in order to be comfortable loaning your business money. They can help present your company well so you get the funds you need at the best terms possible.
- Budget wisely. Knowing where to spend the money you make and staying on a budget is hard. Accountants are the perfect people to help stay on top of things because those are the very numbers they are focused on.
- Help with hiring. While they aren’t HR professionals, they can come alongside your hiring managers to help them know what kind of positions your business would benefit most from having more workers in. And when it comes to making sure that you can afford that new hire and all the expenses that will go along with them, an accountant could be a lifesaver.
- Introduce cost-saving technology. There are so many advancements in automation when it comes to business finances (and many other areas.) A good accountant who is staying on top of current trends will be able to put many of these time (and money) saving technologies to use in your company to help make it more efficient…and profitable.
Bookkeeper vs Accountant…No Problem Here
Regardless of whether you’re looking for a bookkeeper or an accountant, wouldn’t it be incredibly valuable to be able to find both in one place?
If you’re in need of someone (or a team of someones) to help you get your finances under control and operating smoothly so you can use that information to focus on growing your business, we’ve got what you need.
Our team of accounting professionals (including bookkeepers, accountants, CPAs, and other business experts) has over 40 years of experience working with thousands of small business owners in industries of all kinds and companies of all sizes. Before you spend another day trying to manage your finances yourself, schedule a call with one of our accounting pros to see how we can help. We think you’ll be glad you did.
