Bookkeeper Vs. Accountant: What is the Difference Between Bookkeepers and Accountants?

Bookkeeper Vs. Accountant: What is the Difference Between Bookkeepers and Accountants?
Bookkeeper Vs. Accountant

Bookkeepers and accountants both want to help your business succeed financially, but they have different roles. Bookkeepers handle day-to-day tasks like recording transactions, while accountants provide overall financial advice and tax guidance.

Bookkeepers are like the people who keep track of everyday money stuff for your business, like writing down what you spend and earn each day. Accountants are like the experts who give you advice about money and taxes to help your business do well in the long run.

So what's the difference between a bookkeeper and and an accountant? This article has all the details you need including their functions in an organization and who you should hire for your business.

Bookkeeper Vs. Accountant: What Does a Bookkeeper do?

Small-business bookkeeping is all about making sure you have correct records of every financial thing that happens. To achieve this, bookkeepers must be part of the daily activities of the business. Here are some of their duties:

1. Recording Daily Transactions

Whenever money goes in or out of your company, it should be written down in the general ledger. This is like a big record book that keeps track of money going in (credits), money going out (debits), and how much is left in each financial account. These transactions could be from sales, purchases, bills, and more.

2. Maintaining The Chart Of Accounts

Bookkeepers create a list of financial accounts for a company, called the chart of accounts, and ensure it's not too complicated or too simple. If this list isn't set up correctly, small errors can grow into bigger problems later on.

3. Reconciling Bank Statements

Typically, this task occurs monthly and ensures that the transactions recorded match the information found in the bank statement for that specific month.

4. Preparing Important Financial Reports

These documents consist of the statement of cash flows, a profit and loss statement, and the balance sheet.

5. Managing Accounts Receivable and Accounts Payable

Managing accounts receivable involves tasks like sending invoices, setting payment terms, ensuring customers pay promptly, and chasing overdue payments. On the other hand, handling accounts payable means ensuring that vendors receive their payments.

6. Managing Payroll

Bookkeepers are responsible for reviewing time sheets, calculating deductions, and handling payroll processing.

Qualifications of a Bookkeeper

If you're considering hiring a skilled bookkeeper, consider candidates who have certifications from either the National Association of Certified Public Bookkeepers or the American Institute of Professional Bookkeepers.

You'll notice "CPB" or "CB" after their names. It's important to emphasize that although these certifications hold value, they are not obligatory for someone to be considered a professional bookkeeper.

We just saw the duties of a bookkeeper and the qualifications and their qualifications . Moving on, we will learn about accountants: what they do and their qualifications.

Bookkeeper Vs. Accountant: What Does an Accountant do?

While a bookkeeper's role is focused on meticulous details, accountants usually take a more comprehensive view. Here are some of the tasks accountants handle:

1. Preparing And Filing Tax Returns

Accountants play a crucial role in helping businesses prepare and file taxes during the tax season. Their expertise will help them to reduce business tax bills and ensure accurate filing using the best tax software. This will reduce the risk of an IRS audit due to tax filing errors.

2. Offering Financial Planning Advice

Accountants can assist in choosing the optimal business structure for your early-stage business and often serve as long-term advisors. It may be beneficial to involve them even before finalizing your business plan to receive financial forecasts and financial planning guidance.

3. Help You Apply For And Process Business Loans

Having an accountant is useful when a lender asks tricky questions about how your business is doing, because accountants know all about your company's finances. They can also give you advice about the interest rates and the rules for any small business loan you might get.

Qualifications Of An Accountant

If you're looking for someone really skilled in accounting, think about hiring a certified public accountant, or CPA. CPAs have gone through more advanced education and passed a special CPA exam.

CPAs also have to stay current with their certification, so they usually know about the latest tax law changes.

But remember, not everyone working as an accountant has to be a CPA. Some accountants have a bachelor's degree in accounting but might not have the CPA certificate.

Key Differences Between Bookkeepers and Accountants

The following are the major differences between a bookkeeper and an accountant:

1. Scope of Work

Bookkeepers record financial transactions and manage records whereas, accountants analyze financial data, creating reports, and provide financial advice.

2. Education and Certification 

Bookkeepers may not require formal education or certification, while accountants typically have an accounting degree and often hold certifications like CPA.

3. Decision-Making

Bookkeepers follow established procedures and guidelines, whereas accountants make financial decisions, offer recommendations, and provide financial strategy.

4. Financial Analysis

Bookkeepers focus on data entry and accuracy, while accountants analyze financial data for trends, forecasts, and decision-making.

5. Regulatory Compliance

Bookkeepers assist with data preparation but don't typically handle compliance, whereas accountants ensure compliance with tax laws and financial regulations.

6. Financial Statements

Bookkeepers provide data for statements but don't typically prepare them while accountants prepare financial statements. 

5 Tasks Accountants Handle That Bookkeepers Don't

Because accountants require more education and training, there are certain tasks they can do that bookkeepers can't.

1. Signing Year-end Financial Statements

Although a bookkeeper can assist in preparing the financial data for year-end reconciliations, it's the accountant's duty to verify the accuracy of all information, identify any errors, and address them.

2. Offering Tax Advice

While a bookkeeper can assist in creating tax documents, they may not have the in-depth knowledge of the tax code needed for tax advice, planning, or filing annual returns. An accountant helps business owners to make the most of tax benefits. They will be responsible for identifying deductions and ensuring accurate tax payments.

3. Analyzing financial performance

Accountants examine the financial data and basic reports given by bookkeepers. They offer insights into financial trends, look for ways to reduce costs, and evaluate risks to assist businesses in running more efficiently.

4. Performing Audits

Accountants conduct internal audits to verify the adherence to accounting best practices and the proper tracking and storage of financial information.

5. Financial Forecasting

Bookkeepers concentrate on daily financial data, while accountants use both current and past financial information to predict future business performance.

Is it Necessary to Have Both a Bookkeeper and an Accountant?

Every small-business owner should think about getting a professional accountant for their tax returns, at the very least. As for bookkeeping, some business owners prefer to handle those tasks on their own.

You might be okay with managing your finances and using software like QuickBooks Online, FreshBooks, or Xero to help. However, as your business grows, you should consider hiring a bookkeeper because he can reduce your workload, therefore, giving you more time to focus on productivity.

A bookkeeper could be the business owner, a freelancer, someone on the team, or a professional from an online bookkeeping service like Bench. Accountants are typically brought in from outside, often through recommendations.

Bookkeeper Vs. Accountant: FAQs and Answers

Common Questions About Bookkeepers and Accountants: 
  • What's the main difference between a bookkeeper and an accountant?
Bookkeepers primarily handle day-to-day financial tasks, while accountants focus on providing financial analysis, planning, and tax-related services.
  • Do I need both a bookkeeper and an accountant for my business?
It depends on your business's needs. Smaller businesses may only need one, while larger enterprises often benefit from having both to manage various financial aspects effectively.
  • Can a bookkeeper prepare my taxes?
Bookkeepers can assist in tax preparation by organizing financial data, but accountants typically handle tax planning, provide advice, and file tax returns.
  • What certifications should I look for in a bookkeeper or accountant?
For accountants, certifications like a CPA (Certified Public Accountant) are valuable. For bookkeepers, certifications from organizations like the AIPB (American Institute of Professional Bookkeepers) can be beneficial but are not always required.
  • How can an accountant help my business besides tax-related tasks?
Accountants can provide financial analysis, budgeting, forecasting, and valuable advice for making informed business decisions.
  • Do bookkeepers and accountants perform internal audits?
Typically, accountants handle internal audits to ensure financial best practices are followed and data is properly managed.
  • Can bookkeepers and accountants work as freelancers or part of an online service?
Yes, both bookkeepers and accountants can work independently as freelancers or be part of online services that offer financial management support.
  • What should I consider when deciding between hiring a bookkeeper or an accountant?
Consider your business's size, financial complexity, and specific needs. Bookkeepers are great for daily tasks, while accountants offer a broader financial perspective and expertise.
  • Is it essential for my business to have professional financial help?
It is important to hire professional assistance as your business grows. A bad decision can ruin the business that took you years to build. Therefore, you need a professional to help you make good decisions.
  • How often should I consult with a bookkeeper or accountant?
The frequency of consultation depends on your business's needs. Some consult regularly, while others may only require occasional assistance, such as during the tax season or financial planning stages.
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