Most people would be hard-pressed to describe the difference between an accountant and a bookkeeper.
While these financial roles share common goals, they support different stages of the accounting process. As a business owner, it’s important to know the difference.
In this post, we’ll review:
- The similarities and differences of the two professions
- How to determine whether you need to hire an accountant or a bookkeeper
- When you should begin seeking financial support for your business
First, let’s define the processes behind the professions.
Accounting is the process of keeping financials for a company by recording, summarizing, analyzing, consulting, and reporting. Accounting tasks are usually performed by a certified professional accountant (CPA).
Bookkeeping is the record-keeping part of the process in which all financial records of a business (including the day-to-day transactions) are recorded and stored in a database. Bookkeepers do not require a license but can choose to obtain a certification. The required certifications or licenses usually depend on where the individual, or the individual’s employer, is located.
Where bookkeeping ends, accounting begins.
Bookkeepers and accountants’ work often overlap, as bookkeeping is a part of the accounting process.
A bookkeeper records and classifies a company’s daily financial transactions such as sales, payroll, payment of bills, etc.
Their focus is on accurate record-keeping and less focused on interpreting the data and analytics.
An accountant builds on the information that is provided to them by the bookkeeper. Typically, they’ll:
- Review financial statements prepared by a bookkeeper
- Analyze and interpret this information
- Turn the information (or records) into a report
- Share advice based on what they’ve reported
The records reported by the bookkeeper will determine the accountant’s advice to leadership, and ultimately, the health of the business overall. Each piece of the financial process is just as important as the next.
Bookkeeper or accountant? Which do you need?
It is important to understand whether you need to hire a bookkeeper or an accountant. This choice is primarily dependent on the industry and the level of expertise required.
Sure, a bookkeeper may be less expensive to employ and a great choice for daily transactions, but if you need insight and advice on how to better operate your business at scale…you may also need an accountant.
Here are some industry-related questions to consider when making your decision:
- How large is your inventory?
- How many employees do you have?
- What industry are you in?
Industries that work with complex financial systems and high-volume transactions require accountants, i.e. government agencies, colleges, hospitals, etc.
When it comes to expertise: A knowledgeable, skilled bookkeeper with years of experience is most likely more qualified to run the books for your business than a fresh-off-the-campus CPA.
Keep this in mind when filtering applications; try not to judge an applicant based on their education, alone.
Consider these questions when reviewing a candidate:
- What is their level of expertise? Certifications?
- What services does the individual offer?
- What services does the individual have experience offering?
In 2021, offering client accounting and advisory services is a must.
When should you seek financial support?
It’s never too early to engage an accounting professional. Business owners, who hire financial support in the early stages of their growth, rarely regret it…if ever!
An accounting professional can help you create a plan, ultimately saving you time and money in the future. And having the support of a bookkeeper will free up your time, allowing you to focus on your business.
Choose what makes the most sense for your type of business. And, simply pivot if (or when) you need to hire the other.