When you’re in the beginning stages of building out your finance team, you’ll likely deal with the debate of hiring a bookkeeper vs. an accountant. It’s common to hear these roles used interchangeably, but there are some important differences that set them apart. In this blog post, we’ll go over each role, how they both overlap and offer insight into when it’s time to bring these roles onboard to your business.
Difference between bookkeeping and accounting
Before getting into the differences between a bookkeeper and an accountant, let’s back up and quickly go over the difference between bookkeeping and accounting.
What is bookkeeping?
Bookkeeping is the process of tracking a company’s financial transactions on a daily basis. Everything from sales, payroll and bill payments are all cataloged and organized for accessible review. Organizing finances is an integral first step in a bookkeeper’s work in relation to an accountant. Accuracy and organization are essential in all bookkeeping records to help companies better track their cash flow and spending. Good bookkeeping helps increase visibility, prevents overspending and helps keep finances up to date.
What is accounting?
Accounting is the process of consolidating the information provided by bookkeeping to measure, assess and communicate a business’s financial health. The main function of accounting is to help businesses make strategic decisions, which can be achieved by processes such as analyzing operating costs, reviewing financial statements and filing tax returns.
Bookkeeper vs. accountant: What does each role do?
A bookkeeper and an accountant frequently work together and both offer financial support to a business. Here are the major differences and similarities between the two.
What does a bookkeeper do?
Bookkeepers are in charge of tracking all of a company’s financial records and accounts, which are kept in a record-keeping system known as a general ledger. Bookkeepers post all costs (debits) and income (credits) of a company and provide financial reports to supervisors and managers. Becoming a bookkeeper doesn’t require any formal qualifications, but many bookkeepers complete a bachelor’s degree or take exams, such as the Uniform Certified Public Bookkeeper Examination, to secure a certification.
What does an accountant do?
An account is responsible for keeping and interpreting financial records. Other duties in the accounting process include financial forecasting and offering strategic advice. There are no mandatory requirements to become an accountant; however, it’s common to have a bachelor’s degree, typically in accounting. Some accountants are licensed as a certified public accountant (CPA), a designation that’s provided to a licensed accounting professional. A few CPA requirements include passing the CPA Exam, holding a bachelor’s degree and fulfilling individual state requirements. Compared to an accountant, a CPA can perform a broader range of accounting tasks, such as preparing an audited financial statement
How bookkeepers and accountants are similar
Both a bookkeeper and an accountant play a large role in how money is managed. Bookkeepers and accountants both need to keep thoroughly detailed and organized records, whether they’re bookkeeper’s ledgers or accountant’s records. A company may employ both for financial analysis and advice. Both types of financial workers have something to offer for small and large companies.
How bookkeepers and accountants are different
The key distinction between a bookkeeper and an accountant is how data is handled. Bookkeepers collect, track and organize a company’s business and activities, providing the crucial first step for an accountant to take over. Once the bookkeeper prepares the data, the accountant provides detailed insights and financial statements for a business, which can include tax returns and forecasts for the company’s future incomes or expenses.
When to hire a bookkeeper vs. accountant
Bookkeeping can be an arduous process, especially for a small business owner. Tracking, organizing and cataloging heavy sets of information is time intensive and often requires professional help for accuracy and comprehensiveness. Typically, a business would hire a bookkeeper if they have limited time, missed expenses and credits, late or incorrectly filed taxes, or they notice that new profits aren’t being generated. Having a bookkeeper organize your data would be an excellent way for any business to restructure and get back to turning a profit.
On the other hand, hiring an accountant is generally reserved for when a company needs a reliable, frontline professional to regularly examine their operations, trends, costs and revenue. Without understanding what to do with the wealth of information provided by a bookkeeper, that information is essentially wasted along with time and money. Hiring an accountant is also a great way to make filing taxes significantly easier.
Can you hire both a bookkeeper and an accountant?
There’s no reason a business couldn’t hire both a bookkeeper and accountant, and in all probability, the presence of one will enhance the effectiveness of the other. In fact, if a company is undergoing rapid growth, it’s common to hire both once the option becomes available. Bookkeepers and accountants work side-by-side to help provide you with up-to-date financial information and to interpret that data for you.
How Routable makes life easier for bookkeepers and accountants
Routable is a financial service that makes tracking expenses and income far more manageable than traditional printed receipts or invoices. With everything cataloged and tracked, any bookkeeper’s role is made that much simpler with readily available, automatically collected information provided by Routable. For accountants, Routable increases financial visibility and analytics through robust reporting, helping advisors give more accurate feedback on your business’s financial health.
Conclusion
In the end, both of these roles are an asset to any business when effectively implemented and can make managing the nuances of business finance far easier than going at it on your own. Small companies may be able to use a bookkeeper alone, but if your finances are becoming complicated or your business is growing fast, consider adding an accountant as well. The size of your business and complexity of your finances can also determine if you’ll need multiple bookkeepers and accountants.
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