Accountants and bookkeepers are one of the common essential professionals for businesses. Although many companies employ these professionals in a range of different ways, all businesses need their accounts taken care of; whether for taxes, payroll, or sales forecasting. Today, accounting has evolved into a very different and, certainly, more efficient and formalized profession, as business needs have changed throughout time.
When talking about accountancy, the people working in this field are described with terms like bookkeeper, accountant, CPA, clerk or auditor. All of which are valid and somewhat distinct roles. Today we’ll be talking about two common terms that cover most of the accountancy needs of any business: bookkeepers and accountants. We will explore what a bookkeeper does versus what an accountant does and how the two roles differ yet depend on each other.
What is the difference?
A good amount of people may perceive “accountant” and “bookkeeper” to be different terms for the same thing. Who can blame them? These roles are quite similar, and in some cases, a skilled bookkeeper may be doing some of the work an accountant normally does and vice versa. Both professionals are familiar with and perform basic accounting concepts, and both may have even taken similar courses at a university. Many accounting graduates fresh out of college may start work as a bookkeeper, or as a junior accountant with bookkeeping duties. The lines are further blurred as the work they do individually is integral to each other, like an architect and a builder. As similar as they might seem, the roles of an accountant and a bookkeeper are significantly different, albeit overlapping and interconnected.
If you are reading this, you might be in a phase in your business where you are looking to hire someone, whether that be outsourced accounting or a full-time staff member, to take care of your business’ finances or perhaps you are interested in pursuing one of these professions yourself. Whatever the case, it’s important to have an understanding of what differentiates a bookkeeper from an accountant and how their work is interconnected.
A bookkeeper’s main duties and responsibilities are to record and, in some cases, sort financial transactions of a business in chronological order and on a daily basis, just as the job title implies. If a business frequently deals with large amounts of income and expenses, you’ll often find a bookkeeper tasked with making sure that information is correct and recorded in a timely fashion. It might sound like a menial task to some, but if you are dealing with hundreds or even thousands of transactions a day, you need a keen eye for detail and top-notch concentrations skills. It goes without saying that it is very important to maintain accurate, reliable records as this is the first step that lays the foundation to all other accounting related functions.
A bookkeeper records essentially two things — income and expenses. For those who don’t know, income would be anything paid to the company relative to any products sold or services rendered. Income can also involve transactions like the sale of assets or rental of excess office space third parties. Expenses, on the other hand, is anything the company spends. This can be anything from office supplies, to wages, to electricity and commercial rent, among many other possible things a business may need. Is it the bookkeeper’s job to make sure these transactions are recorded accurately and in a timely manner. It is also important to note that it is in the bookkeeper’s responsibilities to ensure they are recorded in the right category: reimbursable expenses, cost of goods sold, advertising expense, etc. Today, bookkeepers often use accounting software, which makes the job significantly easier.
The bookkeeper’s data is then taken by the accountant for analysis and interpretation to produce other financial related documents. An accountant uses this data to create audits, financial statements, balance sheets and forecasts among many other important things. It becomes a systematic relationship whose output reflects the financial health of the business.
An easy way to look at what differentiates a bookkeeper and an accountant is that the former deals with managing the data that is in turn interpreted, sorted, and analyzed by the other. It cannot be overstated how crucial and important accountants are for a business. This is proven by the fact that accountants are often invaluable when making big business decisions. For example, an accountant can use complex financial data and forecasts to determine whether a company is in a good position to expand their operations, add a product to their product line, or to acquire another company. These decisions can cost a business hundreds of thousands and are often necessary to maintain a competitive edge. That being said, accountants are looked upon during the decision-making process to provide invaluable insight into the company finances so that management can make more informed and intelligent decisions. Accountants can also choose to specialize in a specific part of the field such as tax accounting, auditing, forensic accounting, management accountant, and more.
Do you need an Accountant or a Bookkeeper?
Simply put, bookkeepers and accountants are two different roles that work in tandem to ensure businesses are keeping track of its money. If you are hiring someone to manage your finances, the first step would be to think about what your objectives are. If you need someone who will turn data into valuable information, or if you are preparing for big milestones for your business, it will be best to hire an accountant. On the other hand, if your needs are more focused on organizing your business’s income and expenses, a bookkeeper will do a fine job in doing so.
As we move into a more technologically savvy age, understanding if you need outsourced accounting is good to take into account. Professionals who understand how to best utilize QuickBooks and other integrations could be what you need to be able to focus on growing your business, not just simply managing it (like restaurants). Hopefully, this article was able to give you some insight into the two roles to help you with your decision.