What is bookkeeping? What is accounting? Is there really any difference between the two terms? While business owners often use the terms interchangeably, there are important differences worth pointing out. This article will outline the main differences to help you decide what’s required for your business’ needs.
The Bookkeeper
The role of a bookkeeper is to provide efficient and accurate financial data entry and processing of that data. A bookkeeper is any trained professional who handles the financial transactions of a company and records them. They may be hired full-time by a business to deal with daily expenses or they may be an independent contractor collecting weekly or monthly receipts and other documents. A bookkeeper’s education vary, but many are highly trained and experienced.
On the most basic level, bookkeeping is data entry, simple math, maintenance of accurate records, spotting potential issues, and keeping an eye on the budget. Specific tasks vary depending on the company and industry, but all bookkeeping centers on rapidly getting data into an organized system. They might work with a software like QuickBooks and use spreadsheets and databases to accomplish their work. Though much of the work is automated, human oversight is crucial to assure there are no errors.
As mentioned, bookkeeping might be down by a full-time employee, or by someone outside the company. A bookkeeping agency typically works with more than one type of account. In larger businesses, separate people probably manage each account. For instance, some people could concentrate on payables and receivables, while another may only focus on payroll. For small business, the owner or office probably does the bookkeeping and will only turn that work over to someone else when the works gets too large to handle.
The Accountant
In the eyes of many people in the business world, a bookkeeper and an accountant are the same thing, yet there are a few key differences. While a bookkeeper is focused on a business’ daily operations, an accountant is more interested in the “big picture” of the company’s financials. Accountants will not typically do data entry associated with day-to-day operations, but instead work with interpreting, analyzing, and summarizing the data.
Accountants need a college degree and expertise. The highest certification for an accountant is the CPA, a designation that stands for “Certified Public Accountant.” The range of skills in an accountant is much larger than a bookkeeper: accountants be skilled in tax preparation, auditing, or financial planning.
Which Does Your Business Need?
Does your business need a bookkeeper or an accountant? Or both? A bookkeeper is essential for the day-to-day tracking of the finances of your business. Though when a problem arises, tax time rolls around, or when financial planning, an accountant may also be necessary. Additionally, many businesses find that occasionally consulting an accountant, tax lawyer or other high-level professional is necessary depending on their needs.
Companies looking for an in-house bookkeeper should create a detailed and specific job description prior to hiring. For small businesses, using a contract bookkeeper or a CPA firm is helpful, since you don’t have to hire someone full-time. This contractor (or group) will be able to tell what is required for your business and may offer a package of services that will meet your specific financial tracking needs.
To make the right decision for your company, requires understanding what your company needs and what bookkeepers and accountants offer. If you handle your own transactions and feel overwhelmed, a freelance bookkeeper, accountant, or CPA firm can help you carry the load and get control. Once your books are in order and you are familiar with your contractor and their skills, you will be in a better position to decide whether an accountant’s advanced services are needed.
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