Bookkeepers vs. Accountants

One of the most common questions I get is “What is the difference between an accountant and a bookkeeper?” Or, “But I have an accountant, why do I also need a bookkeeper?” (Ok, so maybe two questions!)

While there is quite a bit of crossover between the two, bookkeepers and accountants serve different purposes for small businesses. So let’s cover some basics!

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A bookkeeper is laying the foundation of your business’s financial records, handling the day-to-day recording of transactions including purchases, receipts, sales, and payments. Some businesses use their bookkeepers for accounts receivable and accounts payable, payroll, assist with budgeting, and benchmarking (comparing businesses within an industry). They are like a second set of eyes on the financial side of your business, to make sure transactions in your accounts are legitimate (to help prevent fraud and incorrect transactions from a vendor or credit card company), you are paying your bills on time, and collecting payments from clients or vendors. A good bookkeeper is worth their weight in gold because they can save you from paying your (much more expensive!) accountant to do simple tasks to prepare your financial statements or complete your tax returns because they have already done all that legwork.

There a very few barriers to entry to become a bookkeeper because there are no formal educational requirements. A basic understanding of bookkeeping and financial topics is really all that is needed. Also, a bookkeeper is expected to follow one of two accounting methodologies: the Generally Accepted Accounting Principles (GAAP) or the International Financial Reporting Standards (IFRS). These methodologies help maintain a certain standard of reliability within the accounting world.

An accountant looks at the overall financial health of your business by interpreting, analyzing, summarizing, and communicating the financial data compiled by your bookkeeper. They look at the big picture to make your books more digestible and easier to understand, and help you make critical decisions for your business. You most likely use your accountant to file taxes as well. (Side note – anyone who carries an IRS Preparer Tax Identification Number (PTIN), can complete your tax returns for you. It doesn’t technically have to be a CPA. That is just the direction most business owners go because tax law can be so complex, and CPAs are the real experts!) Finally, your accountant also can assist you and your bookkeeper with how transactions should be recorded.

The main difference between bookkeepers and accountants is the fact that accountants can do everything a bookkeeper does, but a bookkeeper cannot do everything an accountant does. That is because of the educational requirements of accountants. Most (if not all) accountants have at least a Bachelor’s degree. Certified Public Accountants (CPAs) must have a Master’s Degree and have also passed a rigorous CPA exam. They are also expected to follow GAAP or IFRS methodologies as well. So, while your bookkeeper may be an absolute expert in keeping your books and know all the ins and outs of your business, I always highly recommend having an accountant as well.

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Together, your accountant and bookkeeper can help you better understand the finances of your business. Most likely, you did not start your business to sit in your office every week to work in your books or pull your hair out every spring while completing your tax returns. While outsourcing these tasks can add to your overhead, it also opens up more time to devote to your business. More time in your business will mean more revenue rolling in!

Have a bookkeeping question or interested in my services? Email me anytime! I would love to chat about how I can empower you to get back to what you do best – running your business!