Bookkeeping and accounting are both vital processes in a business. They support your organization in different stages of the financial cycle. Although they share the same goal, there is a significant difference. In general, a bookkeeper’s task revolves around the recording of financial transactions while accountants are responsible for interpreting, organizing, evaluating, reporting and summarizing financial data. While bookkeepers can provide reports and summaries of finances, they often do not have the expertise to interpret and evaluate data.
Now that you have a sense of how these two functions differ, let us explore which one fits your business requirements.
Bookkeepers are mainly responsible for entering records into the books and keeping them current. They keep track of the financial activities that move in and out of the company, usually through a general ledger or journal. This makes bookkeepers a key component to building a financially stable business.
Bookkeeping tasks are often transactional. It involves completing payroll, monitoring all income and expenses, producing invoices, paying bills and balancing and maintaining subsidiaries and ledgers. They also make sure that the accounting system, spreadsheets and databases are populated with the right records. Since accounting solutions automate many of these functions, bookkeepers in small businesses can already organize and summarize financial data in financial reports.
Keeping the books in a consistent way is the starting point and the cornerstone of the accounting process. For that reason, it is essential to get a qualified bookkeeper who can understand the ins and outs of your financial operations.
Depending on the size of your company, an accountant may perform some of the duties of the bookkeeper. They can go over the books and check whether the records are accurate. However, in most circumstances, accountants follow a high-level process using the financial data gathered by the bookkeeper. They analyze financial transactions and reports in accordance with the accounting principles, standards and requirements.
Accountants also prepare financial statements of a business, evaluate costs of operations and fulfill income tax returns. They examine and interpret financial data to create reports that reveal the company’s financial condition and performance. This ultimately helps you, as a business owner, to make informed business decisions.
The result of the accounting process can help you better understand your cash flow and profitability. It shows you the bigger picture of the company and where it is progressing. Besides guiding you with your decisions, you can turn to your accountants for advice in tax filing and planning as well as financial projections for the future of your business.
Gaining a solid grasp of these two functions is integral when running your own business. However, it doesn’t stop there. You also need to know the kind of qualifications bookkeepers and accountants have in order to find out which one you need and when you need them.
Bookkeepers need at least a high school diploma to start their career. However, larger companies often look for bookkeepers with a degree in business or accounting. To do bookkeeping efficiently, the individual must have a great understanding of the accounting language, be detail-oriented and skilled in using various digital accounting systems such as Xero, Quickbooks and Zoho Books.
Accountants should have at least a bachelor’s degree. Some accounting professionals pursue further education to become certified public accountants. To be successful in their job, accountants should be excellent at numbers, have an investigative mindset, a sharp eye for detail, and proficiency in technology. More importantly, they should possess unwavering integrity and honesty.
Figuring out who you need is not an easy task. There are several factors you should consider, such as the size of your business, the industry you belong to, the number of your employees and so on. One thing is certain though, both functions are crucial to the growth of your business. Rather than seeing them in a bookkeeping vs. accounting perspective, keep in mind that both processes work hand in hand to keep your financial operations running smoothly.
The bigger your organization, the more important it is to have a professional accountant to support your bookkeepers. On the other hand, for a small business with few transactions on a daily basis, hiring bookkeepers will make the most sense as they are less expensive than accountants. But it is still important to get CPAs periodically to track and analyze your financial information.
Are you looking for the right person to keep your financial accounts in good order? We’d be glad to help you. We can set up an individual or a team of bookkeepers and accountants to serve as a virtual extension of your business.