You’ve likely heard people mention accounting and bookkeeping in relation to their business, but do you actually know the difference between the two? Is there one? Accountants and bookkeepers both add value to your company by maintaining your accounts, tracking finances and tax management, but which do you need to keep your business afloat?
In this short article, we will share some of the key differences between the two terms and help you to understand what type of financial team you need to make your business successful.
Bookkeepers record the day-to-day financial transactions of a business and ensure that information is organized into clear categories to make tax returns easier to complete at the end of the year.
As suggested by the title, bookkeepers typically keep a general ledger to track company costs, invoices, income, and any other expenses. While this was traditionally done by pen and paper, today’s bookkeepers now use specialized software such as QuickBooks to store and track all company expenses in one place in a clear, simple fashion.
Some of the key tasks of a bookkeeper include tracking financial transactions, producing invoices, drawing up financial statements, maintaining a general ledger and running payroll.
Unlike an accountant, a bookkeeper does not require a formal qualification in accounting to do their job. But many bookkeepers do have training in the field and they have a keen eye for detail as they must maintain important financial documents.
Although there is often an overlap, accountants typically look at the bigger financial picture rather than the day-to-day. They may rely on bookkeepers to provide them with a company’s financial data to produce comprehensive financial models for a business.
Business accountants can analyze bookkeeping data to provide useful insights which can help a company make better financial decisions and reduce wasteful spending or unnecessary tax expenses.
The activities that accountants perform include adding business expenses to bookkeeping data, revising financial statements, assessing operational costs, preparing business tax returns, educating business-owners on financial responsibilities, and helping them to make the best financial decisions for their company.
Most accountants have a bachelor’s degree in accounting or a similar subject in order to develop the skills needed to carry out an effective financial analysis of a company’s financial records. Many accountants will oversee the work of a bookkeeper to ensure that a company’s finances are being tracked accurately for tax purposes. Accountants may have additional credentials if they seek further certifications such as the Certified Public Accountant (CPA) credential, which allows them to give tax advice and file tax returns.
Who’s Best for Your Business?
Now that we’ve cleared up some of the core roles and responsibilities of both accountants and bookkeepers, who do you need to hire to keep your finances in order?
Depending on the size and needs of your company, either one could be well suited to manage your finances, and most companies need both. Many companies hire a bookkeeper for the day-to-day upkeep of their financial records. Then towards year end, they work with an accountant or CPA to prepare for tax time.
At BlueSpark, we primarily focus on bookkeeping, but we have a range of accounting professionals, including CPA’s, on staff. If you would like to discuss which professionals would be best suited to help you with your business, feel free to sign up for a free consultation.