While many people assume that bookkeepers and accountants are the same thing, their credentials, responsibilities, and businesses are quite different. Accountants and bookkeepers often work together to support different aspects of the business during various financial stages. While accountants handle the analytics, bookkeepers are responsible for recording financial transactions.
Simply put, accountants help you understand your business'finances and how to make the most of your money, whereas bookkeepers record your business'financial activity. Bookkeepers cannot be accountants without the necessary credentials, but accountants can work as bookkeepers. Here is more about what makes bookkeepers and accountants different, how to choose between the two, and whether you should trust your finances with software alone.
Quick differences between accounting and bookkeeping
Before we dive into the different roles and responsibilities of bookkeepers and accountants, here are a few quick differences between these financial professionals.
Accountants
- Analyze operating costs
- File tax returns
- Perform financial audits
- Provide tax advisory services
- Prepare financial transaction entries
- Review financial statements
- Focus on tax planning
- Analyze financial records
- Make financial forecasts
- Assess your business’financial health
Bookkeepers
- Prepare financial records for review by an accountant
- Categorize and record day-to-day expenses and income
- Compile year-end financials for an accountant
- Record payments received and send invoices
- Payroll processing
- Conduct monthly bank reconciliations
While your accountant will offer financial insights, your bookkeeper is responsible for keeping your finances organized by recording all transactions, including sales and expense receipts, on a day-to-day basis as part of your accounting process, including:
- Payments made
- Sales
- Company purchases
- Receipts
According to D’Arcy Becker, a professor at the University of Wisconsin-Whitewater Department of Accounting, “Bookkeeping is designed to generate data about the activities of an organization, while accounting is designed to turn data into information.”
Bookkeeping and accounting go hand in hand
Bookkeepers and accountants often work together to maintain their client’s financial records. Your business could benefit from a finance team that includes both accountants and bookkeepers alike. Your bookkeeper can produce and keep track of invoices, ensure all financial transactions are properly recorded, and post credits and debits accordingly. You can also rely on your bookkeeper to prepare cash flow statements, income statements, balance sheets, historical accounts, general ledgers, and balance subsidiaries.
Your general ledger should be at the top of your financial priorities, as this will record the amounts of expenses and sales generated from your business each day. Maintaining these records is also known as “posting”. The more sales are made, the more your general ledger will be posted. If you don’t want to use a bookkeeper, you can do this yourself by using paper and pen, creating a spreadsheet through Microsoft Excel or Google spreadsheets, or specialized computer software.
The more complex your business is and the greater the number of sales completed will determine how frequently your bookkeeping systems need to be updated. According to the IRS, certain types of business transactions will require supporting documents if you are hoping to claim exemptions or tax deductions when filing your returns. Once all the data has been collected and organized, it is time for your accountant to step in. They can review and analyze your financial records and offer insight into how you can better protect your business and reduce your personal and business tax liabilities.
The purpose of accounting
Your accountant has more subjective responsibilities than your bookkeeper. While your bookkeeper is maintaining an accurate account of your financial transactions, your accountant is there to handle more intricate tasks, such as:
- Review company operational costs
- Analyzing business financial statements
- Helping you understand how your financial decisions will affect your business
- Preparing and filing your state and federal income tax returns
- Preparing and organizing adjusting entries or expenses that have not yet been reported by your bookkeeper
When taking advantage of the services your accountant offers, you can make better financial choices that could help catapult your company to success. When you are ready to look at the big picture of your business’financial situation, your accountant will be there to forecast and help you maintain a path of progress.
Accountants vs. bookkeepers
Accountants and bookkeepers can work together to keep your company’s financials on track. They often offer the same services for ecommerce businesses and those who need help with personal finances. Bookkeepers are there to ensure financial transactions don’t slip through the cracks and are accurately accounted.
Accountants have the authority to advise you on tax matters, analyze your business finances, and offer consulting services.
What does an accountant do?
Unless your accountant is doubling as your bookkeeper, they cannot get started analyzing your transactions and data until your bookkeeper is done organizing this information. Once your accountant has access to these details, they may begin by:
- Adjusting entries
- Verifying provided data
- Performing audits
- Preparing balance sheets and income statements
- Generating financial reports
- Analyzing financial data
- Identifying opportunities for improvement and growth
It is up to your accountant to look at the bigger picture when it comes to your company’s finances. The type of business you are in, how many employees you have, the frequency of transactions, and other factors all determine how your accountant will approach your financial strategy. You need to get a complete picture of your business’ situation when it comes to cash flow, debts, and expenses if you hope to meet your goals and continue to thrive.
When searching for an accountant, consider whether you need a traditional accountant or are better off hiring a certified public accountant (CPA). Certified public accountants will have passed the Uniform CPA Exam,which ensures they are experts in tax codes and standard accounting practices. CPAs should have in-depth knowledge of U.S. tax laws and can advocate for your best interests if you become subject to an IRS audit.
Day-to-day accountant responsibilities
When you hire an accountant, you may be interested to learn about what their average daily tasks might include. Here is a general overview of some responsibilities your accountant might handle on your behalf:
- When it is time to expand your company, but you do not want to tap into your personal finances to do so, your accountant can help you apply for a business loan. Lenders will want comprehensive insight into your company’s finances, and your accountant can help them understand how your business is performing. They can also review the specific financial details that come with business loans, such as the terms and conditions, whether the interest rate is competitive, and what you will be expected to pay back by the end of the loan term.
- When you are unsure of what is next for your business financially, your accountant can offer the support and advice you need when you need it most. If you have yet to formally structure your business, you can work with your accountant to foster brand loyalty and select the right business entity to set your company up for success when it comes time to file your business taxes.
- You may not fully understand the complex state and federal tax laws that could impact your business. Your accounting professional can answer your specific questions, help you minimize your tax liability, and ensure you are prepared when you owe business taxes. When you work with an accountant, you may be less likely to be audited by the IRS due to mistakes in your tax filings.
Are accountants also bookkeepers?
Generally, accountants are not bookkeepers, becausetheir responsibilities are often more detailed than those of a bookkeeper. However, there is no law that says an accountant cannot also act as your company’s bookkeeper. Many small businesses will want to find an accountant who can handle their bookkeeping costs to save time and money.
What credentials does an accountant need?
Before someone can become an accountant, they must achieve their degree. Accountants will generally need to have earned at least a bachelor’s degree from an accredited university or college to qualify. Accountants do not necessarily need to earn a CPA to work as an accountant. Those interested in furthering their careers and refining their accounting skills may opt to expand into a CPA position. To do so, you must:
- Pass the Uniform CPA Exam
- Maintain continuing education requirements
CPAs may also find further success in working as a Chartered Financial Analyst (CFA). To earn the title of CFA, an accountant will learn more about investments, ethical financial practices, how global markets work, and how to manage investment portfolios. Before an accountant can qualify for a CFA, they must have at least four years of accounting experience and pass the Level lll final exam, which has a pass rate as low as 47 percent as of August 2023, according to the CFA Institute.
Additionally, accountants could opt to expand their service offerings by becoming a Certified Internal Auditor (CIA). Accountants must have a minimum of two years of working accounting experience and pass a comprehensive exam to earn their certification. CIAs are more appropriate for the job when you are interested in security monitoring or focusing on financial risk assessment.
How accountants charge for their services
The amount you can expect to spend when you hire an accountant varies widely depending on your geographic location, the complexity of your tax situation, how much experience your accountant has, whether they have a full roster of existing customers and other factors. According to the U.S. Bureau of Labor Statistics (BLS), the median annual salary for accountants as of 2022 is $78,000 or just over $37 per hour. Depending on whether you hire a private accountant or choose to work with an accounting company, you could be paying a fixed rate for specific services or an hourly rate.
Benefits of working with an accountant
If you are still unsure whether hiring an accountant is the right move for your business, consider the advantages and disadvantages. Some of the top benefits of having an accountant handle your company finances include:
- Legal support if you are being audited by the IRS and are facing tax issues
- A comprehensive analysis of your company’s finances as a whole
- Expertise in tax laws, investments, and financial strategies
What bookkeepers do
Bookkeepers play an integral role in how well businesses maintain their records. It is the bookkeeper’s responsibility to ensure all daily transactions are accurately recorded and easy to understand. These bookkeeper records will be crucial when it is time for your accountant to step in and handle the interpretation of this data.
Daily bookkeeper tasks
The number of business transactions occurring daily will determine how frequently your books need to be updated by your bookkeeper. Some potential tasks and responsibilities your bookkeeper might absorb include:
- Updating your general ledger when money is deposited into or taken out of your company bank account
- Maintaining your general ledger to ensure debits, credits, and balances are accurate at any given time
- Handling payroll by reading time sheets, processing payroll, and accounting for employee deductions
- Ensuring vendors are paid and handling other accounts payable details
- Tracking down unpaid invoices and establishing payment terms or arrangements when customers are overdue on payments
- Setting up your business’ chart of accounts
- Reconciliation of bank statements each month
- Maintaining subsidiary accounts
Credentials needed to become a bookkeeper
Anyone who is financially savvy understands accounting, and pays close attention to detail could become a bookkeeper. There are no education requirements that must be met for an individual to begin working as a bookkeeper, which is in stark contrast to the higher education accountants must earn. Your bookkeeper does not need any special licensing or certifications to be successful. However, for this reason, many bookkeepers are often supervised by their clients or the company’s accountant to ensure accuracy.
It is important to note that while bookkeepers may not require certification, many of the country’s top bookkeepers earn licensing and certifications. The National Association of Certified Public Bookkeepers (NACPB) and the American Institute of Professional Bookkeepers (AIPB)both offer opportunities for bookkeepers to obtain higher education and earn licensing.
To qualify for certification through the NACPB, bookkeepers must pass exams that demonstrate their knowledge of payroll processing, small business accounting and financial management, and bookkeeping.
Bookkeepers also have the option of completing a separate payroll certification. Not all bookkeepers can venter the NACPB bookkeeper licensing program. They must have at least 2,000 hours of relevant work experience to participate in the program, be willing to agree to a code of ethics and pass a licensing exam.
Upon certification, bookkeepers must earn a minimum of 24 hours of continuing education credits each year to maintain their license status.
To qualify for an AIPB certification program, bookkeepers must have a minimum of two years of experience and be able to pass a challenging exam. Bookkeepers will also need to continue to earn continuing education credits throughout their careers to maintain their certification.
Bookkeeper rates and fees
Bookkeeper rates are typically more cost-effective than accountant rates. This is, in part, because accountants have a higher level of education and expertise regarding business finances and forecasting.
Several factors will determine what you could expect to spend when hiring a bookkeeper, including:
- The level of experience and expertise of prospective bookkeepers
- How much time the bookkeeper needs to get organized and update your general ledger
- What specific bookkeeping services your bookkeeper will need to take on
- How congested the bookkeeper market is where you live
- Advantages of hiring a bookkeeper to manage your finances
While you could certainly rely on an accountant alone to handle your business’ finances, you may be able to save your company some money by having a bookkeeper handle some of the more nuanced financial details. Some of the top advantages of working with a bookkeeper include:
- Cost efficiency: Bookkeepers are often less expensive to hire than accountants
- Organized documents: The ability to keep your financial documents and reports organized
- More precise evaluation: An accurate assessment of your company’s financial situation as opposed to an outlook or estimate provided by an accountant
Alternatives to hiring an accountant or bookkeeper
Not everyone feels it necessary to hire a bookkeeper or an accountant. Some business owners prefer to keep a close eye on their company's finances by taking advantage of computer software that is designed to make it easier to handle both bookkeeping and accounting responsibilities.
If you work with a small team, one of your current employees may be able to handle your general ledger and figure out how to reduce spending. Many types of accounting software allow you to handle your own payroll, inventory, and invoices, and generate business expense reports. When you are unsure whether software is the right alternative, consider your budget and knowledge of your company's accounting needs.
Before signing up for a paid accounting and bookkeeping software program, consider taking advantage of a free version of comprehensive financial reports, tracking income and expenses, and collaborating with other users.
When to hire a financial pro to tend to your books
You may not be sure whether you need to hire a professional bookkeeper, accountant, or both. Small business owners and large business owners alike often turn to a professional accountant in their target market for consultations when they need to make important financial decisions or have concerns about potential tax liabilities.
Before hiring a bookkeeper or accountant, consider your budget and the company's financial needs. Do you need a full-time employee or can you work with an independent consultant? Do not hire the first bookkeeper or accountant. Ask your friends, family members, and colleagues for referrals, and do your due diligence before trusting anyone with your company's finances. This includes checking their license status where applicable and asking for references from former clients.
If you are still unsure whether you need to hire a pro, here are some of the telltale signs that your business may benefit from an accountant or bookkeeper:
- You are a business owner who is seeing rapid growth
- You're spending a significant amount of your working hours on accounting matters
- Your taxes have become too complicated to manage alone
Should you choose an accountant or a bookkeeper to manage your finances?
You do not have to choose one over the other. You can hire a bookkeeper to work alongside your accountant to ensure you are accurately documenting your company's financial transactions and analyzing this data to support your company's growth and success. However, if you do not mind handling these matters on your own, you could consider using anautomated software program to keep you organized.
Prioritize managing your business finances
Working with professional bookkeepers and accountants may be in your business' best interests. Your accountant can help you make the best cash flow and tax decisions, while your bookkeeper can offer valuable insight into your business’ financial transactions and keep you organized. While you could use bookkeeping or accounting software to keep your financial situation updated, accountants and bookkeepers offer the human element of being able to answer your specific questions and come up with innovative solutions should your business experience financial troubles.
If you are a business owner looking for tax guidance or financial advice, it may be wise to hire an accountant first. However, if you are more interested in keeping track of day-to-day finances, hiring a bookkeeper could be the better option. In either case, you should stay as organized as possible so your financial professional can handle your business' finances while you focus on growth.
