Many people use the terms “bookkeeping” and “accounting” interchangeably. On some level, it’s understandable. After all, both accounting and bookkeeping deal with financial data and classifying financial transactions.
Bookkeeping and accounting are distinct practice areas, although bookkeepers and accountants may have a few key overlapping responsibilities. Read on to get a better understanding of the differences between these two fields and how they overlap.
Let’s start the discussion with a high-level overview of the bookkeeper and accountant roles and what makes them different.
Bookkeepers and accountants deal with a business’s finances and are responsible for tasks that impact the company’s financial reporting.
As a general rule, bookkeepers are responsible for handling the day-to-day recording of transactions, reconciliations, and other important recording tasks. On the other hand, accountants take on more high-level responsibilities, such as financial planning, business strategy, and advising on a company’s financial decisions. In many cases, they work closely together, with the accountant overseeing the bookkeeper’s work.
Next, let’s take a look at each of these roles in detail.
Bookkeepers manage and record a company’s day-to-day financial transactions. Their focus is usually on record-keeping rather than analysis. While the role varies from company to company, a bookkeeper might:
Good bookkeepers are capable of a wide variety of different finance-related tasks. As they gain experience, they may take on more complex responsibilities, such as advising clients or employers about best practices or compliance standards. They may also work on cash flow management and forecasting to ensure the business’s cash flow remains positive.
While many bookkeepers have a two-year degree in accounting or higher, this usually isn’t a job requirement. Some bookkeepers gain their skills through on-the-job training and become proficient in a year or two.
Bookkeepers usually aren’t required to have any certifications, although they may choose to gain certain certifications in order to demonstrate their expertise and benefit from growing their network. A few possibilities include:
There are some limitations to a bookkeeper’s role, however. They cannot perform independent audits, reviews, or compilations of financial statements and usually don’t prepare income tax returns.
Accountants tend to serve as a type of financial advisor for a business or individual, and most savvy business owners turn to an accountant for advice before making major financial decisions.
Again, the role can vary from company to company, but some common tasks include:
Most accountants have a four-year degree in accounting or finance, and they can earn a variety of certifications, including:
Successful accountants need to have the same knowledge and attention to detail as bookkeepers, along with business acumen, strategic vision, and management skills.
Another way that bookkeepers and accountants differ is cost. According to the Bureau of Labor Statistics, in 2020, the median annual salary for bookkeepers was $42,410, compared to $73,560 per year for an accountant.
Bookkeepers and accountants may work part- or full-time for a company or in an outsourced capacity. Small businesses may not need a full-time bookkeeper or accountant and can save money by outsourcing these tasks on a part-time or as-needed basis. Outsourced bookkeepers and accountants may charge by the hour for their services or a flat monthly rate. According to Thumbtack, depending on the type of work you need done, accountants can cost up to $300 per hour, compared to an average rate of $40 per hour for a bookkeeper.
Of course, cost isn’t the only factor when deciding to outsource your bookkeeping or accounting. Scalability is another benefit because outsourcing allows you to scale your services up or down as your needs change, without the effort and expense of hiring and training new employees.
Value is another important aspect. Hiring an accountant to help with tax planning and preparation can sometimes pay for itself if the accountant helps the business claim valuable tax deductions or credits. Likewise, an accountant who can recommend cost-saving or revenue-boosting strategies that help the business grow may bring a lot more value to the company than the business spends on the accountant’s fees.
As you can tell from reading the above job descriptions for bookkeepers and accountants, there is a bit of overlap between bookkeeping and accounting.
For example, both accountants and bookkeepers may be responsible for ensuring the accuracy of financial transactions, preparing financial records, and overseeing financial reporting. They may both have a hand in preparing a company’s tax filings.
In small businesses, the accountant might take on a hybrid role, performing all of the tasks typically performed by a bookkeeper. Similarly, if a bookkeeper has enough experience and familiarity with accounting, they may be able to provide significant financial advice to the business owner, even if they aren’t formally certified as a CPA.
Often, bookkeepers and accountants work in tandem. The accountant may make recommendations to the bookkeeper on the proper way to record complex transactions, and the bookkeeper provides the data the accountant needs to provide advisory services to the business. In fact, businesses often receive the greatest benefit when bookkeepers and CPAs work together to ensure the company’s books and records are accurate and provide strategic advice.
Both bookkeepers and accountants should have a high level of honesty and integrity, as they usually have access to a company’s bank accounts, employee data, and sensitive financial information.
The roles of bookkeepers and accountants are constantly evolving – especially in the digital age. Accounting and bookkeeping technology is automating many of the tasks that used to take up an accountant or bookkeeper’s time.
For example, before computers became ubiquitous in a business’s accounting department, a retail business might enter each day’s sales into a columnar paper sales ledger, enter expenses into an expense ledger. All those entries had to be added up at the end of each week or month, and the totals transferred into a general ledger. To prepare financial statements, the bookkeeper or accountant would compile all of the information from the general ledger into a trial balance, make any necessary adjusting journal entries, and prepare the financial statements—all of which was done manually.
Today, a Point of Sale (POS) system automatically record’s the company’s sales in its accounting software platform and automatically pulls and categorizes expense transactions from the company’s bank and credit card accounts. The bookkeeping and accounting concepts remain the same, but the mechanics are done digitally—and in some cases automatically. As a result, bookkeepers no longer spend most of their days manually logging new income and expenses.
In some ways, this has led to a decline in demand for bookkeepers. However, in other ways, it has allowed bookkeepers to step into more supervisory and advisory roles. Now, the most important skill for bookkeepers is people skills and the ability to earn trust and build relationships. These skills come in handy when the bookkeeper needs to provide their clients or employers with advice on accounting technology, help design and develop bookkeeping processes.
Technology has also forced both accountants and bookkeepers to be more tech-savvy and adaptable. To better serve clients and employers, they must be familiar with popular bookkeeping and accounting platforms and applications—able to adjust to new demands and responsibilities seamlessly.
Data analytics is another useful skill for both accountants. After all, technology may be able to produce an accurate financial statement. But it’s up to the accountant to analyze the company’s financial data and provide the business owners and executives with advice on improving key performance metrics.
Automation has also forced accountants to look for ways to differentiate their practices and offer more value-added services. Some accounting firms now offer human resources consulting, technology services, marketing, wealth management, trust and estate planning, and other services that help their clients beyond the numbers.
Does your business need a bookkeeper, an accountant, or both? That depends on many factors, including the size of your business, your industry, and the complexity of your accounting and finance needs.
Solopreneurs and small business owners may start out doing their own bookkeeping and accounting. However, as the business grows, it becomes challenging to keep up. Without professional help, they may find themselves skipping bank reconciliations, losing out on valuable tax deductions because they’re not properly accounting for expenses, or having cash flow problems.
With many bookkeeping tasks being automated by accounting software, a small business may not need a full-time bookkeeper. However, at a minimum, it’s a good idea to have an accountant you can turn to for advice as well as tax planning and preparation.
Still not sure whether you need outside help? Here are a few questions to help you decide:
If you’re interested in improving your accounting efficiency or reducing your total costs, consider outsourcing your accounting. If you’re interested in learning more about the Taxfyle platform and how it can improve your bottom line, schedule a live demo of Taxfyle today!
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