It’s safe to say that almost every business owner knows that bookkeeping and accounting are two vital business functions that you can’t do without. But the terms are often used interchangeably, so much so, that many of us forget what that these are two different functions, although they’re obviously intertwined with each other. It’s important to know what are the differences between these two roles, so that you’ll know when you need a bookkeeper, and when you need an accountant.
Some people like to say that the relationship between an accountant and a bookkeeper is similar to that between an architect and a carpenter. One is more involved in high level issues and planning, while the other is more hands-on and focused on the details. It’s also said that accounting is a much broader term, which includes bookkeeping, among other tasks.
Let’s take a look at what are the actual responsibilities of each of these professionals.
A bookkeeper basically handles the record-keeping portion of accounting. The work they do involves recording all of the transactions you do on a daily basis. The bookkeeper will typically post debit and credit entries in your ledgers, generate invoices for your clients, and maintain all of these records in a consistent fashion. As the name suggests, this person takes care of your books, which are something of the financial infrastructure of your company.
The accountant fills a much higher level role, of which bookkeeping is only one subset. An accountant analyzes the information in which the bookkeeper has prepared, and uses that data to generate reports, financial statements, tax returns, and financial models. This person may be involved in designing the bookkeeping system, making adjustments to the bookkeeper’s work, and helping you, as the business owner, understand the bigger picture of your company’s finances.
It’s also worth noting the differences between the credentials required for each of these roles. A bookkeeper may have a bachelor’s or an associate’s degree, but doesn’t necessarily have a degree in accounting or finance. The main skills needed for bookkeeping are knowledge of general financial principles, and meticulous attention to detail. The bookkeeper’s work will often fall under the oversight of either an accountant or the owner of a small business.
The title of accountant requires significantly higher qualifications. An accountant will typically have a degree in accounting or some form of finance. There are also additional professional certifications in which an accountant can earn, most notably the title of Certified Public Accountant, or CPA. To earn this designation, an accountant needs to pass the Uniform Certified Public Accountant test, in addition to having professional work experience.
A bookkeeper and an accountant handle two pieces of the same puzzle. Do you need a bookkeeper? You may be able to manage that work yourself, until the volume becomes too large and takes too much of your time. On the other hand, an accountant provides much more strategic assessment of your finances. Bringing in an accountant will do a lot to improve your financial processes, and give you greater peace of mind.