What’s the Difference Between Bookkeeping & Accounting?
When thinking of the different people who take care of finances, usually a number of people come to mind — including bookkeepers, accountants, and even CPAs. Sometimes people will even use those terms interchangeably.
They all sound relatively the same and all share an industry that involves money and numbers, so they’re all the same, right?
Well, kind of.
So what is the distinction between bookkeeping and accounting? Not every bookkeeper is an accountant – though every accountant is technically qualified to be a bookkeeper – and while both need to be sticklers for accuracy and knowledge of key financial topics, the main difference between a bookkeeper and an accountant is that an accountant has a bachelor’s degree in accounting or similar.
Clear as mud, right? Right.
Maybe the next section will help.
Bookkeeping vs. Accounting
Bookkeepers can assist accountants by preparing the correct documents and establishing the best systems in order for the accountant to have everything they need to be successful.
In order to be a bookkeeper — besides being a lover of numbers and Excel sheets — someone must have two years of eligible experience under an accountant.
To be an accountant, someone usually has a bachelor’s degree and is strong in things like reconciling accounts, preparing financial reports, and completing tax returns.
Let’s break it down a bit more:
- Bookkeepers: Bookkeepers have two to four years experience or an associate’s degree, with their work overseen by either an accountant or the small business owner whose books they are doing. They record financial transactions, which lay the foundation for …
- Accountants: Accountants have a bachelor’s degree in accounting – or a finance degree considered an adequate substitute – and interpret, classify, analyze, report, and summarize financial data.
It’s getting a little clearer, right?
Now, let’s dig deeper to demystify each so you know which one is right for your business.
What Does A Bookkeeper Do?
A bookkeeper can be an essential part of a business. This person allows everyone else to focus specifically on their own tasks to maintain growth while making sure that nothing is falling through the cracks financially.
In a small business, a bookkeeper is beneficial as they can help the small business owner stay on top of tracking expenses or preparing invoices.
So what, exactly, do bookkeepers do?
- Pay client’s bills on a weekly basis
- Bank statement reconciliation
- Journal and data entry (coding)
- Provide clients with weekly & monthly reports
- Weekly accounts receivable aging
- Weekly accounts payable aging
- Monthly aging
- Monthly balance sheet
- Monthly P&L
- Monthly budget to actual
- Monthly statement of cash flow
- Custom reports
- Maintain and manage the chart of accounts
- Debit/credit card reconciliation
- 1099 preparation
- Payroll, including working with a verified vendor to set up the payroll account, schedules and processing
What Does An Accountant Do?
An accountant takes care of all the financial side of the business that may sometimes make your head spin.
They stay on top of it all, and even sometimes help you find ways to scale. For a small business owner, it is usually beneficial to also hire an accountant.
This way they can also focus on what makes their business run in the day to day instead of drowning in forms on forms on forms.
Now, what do accountants do?
- Prepare and adjust entries
- Prepare financial statements
- Complete income tax returns
- Financial analysis and strategy
- Tax strategy, advice and tax planning
- Financial forecasting
- Business establishment assistance
- Corporate reporting and compliance
- Superannuation fund advice
- Financial management advice
And BONUS! An accountant can do all of the above listed for bookkeepers, too – though what they’d be willing to handle depends on the accountant.
When To Hire A Financial Professional
Listen. We’ve been where you are, almost literally. To outsource or not to outsource – that is the question.
We understand that entrepreneurship is a journey, not a destination. If you’re at a crossroads wondering who you can trust to lead the financial side of your business, you’re not alone.
Thankfully, we’ve helped countless businesses navigate the same terrain by matching them with the right person to help with their exact needs so they are free to pursue growth with a trusted financial partner by their side.
So when your business reaches the point when you consider virtual, outsourced financial solutions, the decision – and pressure – to bring in the right financial leadership may prove daunting. But it shouldn’t. BELAY offers remote bookkeeping solutions to companies across the country. Learn more about our services.
To learn more about small business bookkeeping, check out our Ultimate Guide to Bookkeeping.