As your business grows, balancing the books and keeping track of everything on your own becomes more challenging. It would help if you had the right tools to manage your company’s finances to make correct decisions, get paid on time, and stay in control of your finances.
When your small business’s bookkeeping and accounting tasks become difficult to handle by yourself, it’s time to hire help. But do you need a bookkeeper or an accountant? In this blog, we will explain the fundamental difference between an accountant vs bookkeeper so that you can decide which is best for you.
Accountant vs Bookkeeper – Comparison
Accountant vs bookkeeper play a vital role in the financial success of your business, but their roles are different. They focus on different tasks and strategies. Bookkeepers focus on day-to-day record-keeping, while accountants focus on business finances and tax planning. Let’s see the comparison:
- The bookkeeper prepares the monthly financial statement, while accountant prepares files and tax returns.
- Bookkeeper communicates with small business owner regularly, but accountant may communicate less with a small business owner or during tax season.
- Bookkeeper records transactions in the general ledger, handles accounts payable and receivables, reconciles bank statements each month, and manages payroll. Still, an accountant analyzes financial information from the bookkeeper, advises small-business owners on finances, compliance, and taxes, and helps them apply for business loans.
What does the bookkeeper do?
Bookkeepers at small businesses provide financial information to the owners and managers of their companies. They do this by keeping accurate records of all financial activity, such as managing payroll, preparing profit and loss statements, balance sheet, and statements of cash flow. In addition to their regular bookkeeping duties, some of their tasks include the following:
- Recording transactions:
Every transaction for your company should be recorded in the general ledger in terms of credit, debit, and balances for each financial account. These transactions could be payments, purchases, sales, and even deposits. Every credit, debit, and balance should be tracked to ensure a smooth operation of your company.
- Maintaining the chart of account
Bookkeepers set up a company’s chart of accounts and ensure there aren’t too many or too few accounts. They also ensure each account has an accurate description and can track debits and credits correctly to record transactions accurately. The chart of accounts lists all the balances for categories such as cash, revenue, expenses, and stocks.
- Reconciling bank statement
Bank Reconciliation Statement is usually prepared at the end of each month, ensuring the recorded transaction matches what’s in that month’s bank statement.
- Handling account receivable and account payable
Managing accounts receivable entails sending out invoices, establishing payment terms, tracking down overdue payments, and getting paid on time. Handling accounts payable means ensuring vendors get paid. This procedure can involve issuing purchase orders, setting up payment terms, and arranging for delivery to your office when goods are purchased.
What credentials does a bookkeeper need?
If you’re looking for an expert bookkeeper, look for candidates with certifications from the National Association of Certified Public Bookkeepers or the American Institute of Professional Bookkeepers. They’ll have CPB or CB after their names. These professional certifications confirm that applicants have the skills, experience, and education to perform the job successfully.
Advantages of a bookkeeper
Hiring a bookkeeper to file and document your business’s financial records can add value to your business in several ways. Bookkeeping services provide small business owners with time, convenience, and peace of mind. Here are some advantages: They charge lower fees based on the amount of filing and documentation you need. Direct assessment – a bookkeeper will give you a complete insight into your business’s financial standing. Also, they help you to organize your financial documents and reports.
What does an accountant do?
Accountants use their financial skills to interpret the information a bookkeeper collects, analyze and interpret business results, and assist in preparing financial statements. They provide advice and recommendations based on our accounting procedures and business strategy. The typical accountancy tasks are:
- Verifying and analyzing data
- Generating reports, performing audits, and preparing financial reporting records like tax returns, income statements, and balance sheets
- Adjusting entries
- Providing information for forecasts, business trends, and opportunities for growth
- Helping the business owner understand the impact of financial decisions
What credentials does an accountant need?
If you want someone with a higher level of mastery in accounting, consider hiring a certified public accountant. CPAs are the most highly trained and skilled professionals in accounting. CPAs are the most highly experienced and qualified professionals in accounting. They’ve completed an advanced degree and passed the CPA exam, a rigorous test measuring a candidate’s knowledge and proficiency in accounting, auditing, and valuation. CPAs also keep their certification current with significant tax law changes.
Advantages of hiring an accountant
There are several advantages of hiring an accountant which is explained below:
Accountant gives you a comprehensive view of the financial status of your business along with new strategies and recommendations to make financial decisions. On the other hand, bookkeepers are responsible only for recording financial transactions.