Go Public With Reverse Merger shells If you’re interested in…
Bookkeeping vs. Accounting[yoast-breadcrumb]
Bookkeepers and Accountants: Essential Financial Experts for Your Business
Bookkeepers manage day-to-day financial transactions of your business, such as updating spreadsheets, reconciling bank statements, and processing payroll. Accounting has more to do with financial supervision, such as taking the documents prepared by bookkeepers, which the accountant will use to think strategically about the company’s financial health and growth.
Some small business owners may be unsure about the difference between bookkeeping and accounting. It is an important distinction as knowing the difference can help you hire the appropriate professionals for your business and for you to understand what to expect from each professional.
The Basic Differences:
The terms business accounting and bookkeeping are often interchanged, and there is a reason for this. Bookkeepers and accountants often do work closely to fully serve their clients. Both bookkeepers and accountants are responsible for the financial reporting and success of the business.
The differences are becoming increasingly blurred because of advancing technology, and many bookkeepers are now taking on work more traditionally managed by accountants. Similarly, many accountants now focus on helping them manage their entire financial situation.
Traditionally, bookkeepers have managed the day-to-day financial transactions in a business, and recording transactions in accounting software, reconciling bank statements at the end of the month and producing preliminary financial statements monthly. Often, bookkeepers provide other office support, including invoicing clients, paying bills, and completing payroll. Bookkeepers should have at least two years of experience or a degree in accounting. Bookkeepers may do other tasks including advising clients on record-keeping requirements and methods, cash flow forecasting and management, and general record keeping
Customarily, accountants have an advisory role with business owners. As well as preparing the financial statements and reports that are required by banks and governmental agencies, accountants also deliver periodic insight into the financial health of the business. By using financial data, often prepared by the bookkeeper, accountants develop strategic planning and provide insight into strategies business owners can implement to grow their companies.
Their state board of accountancy typically regulates certified public accountants (CPAs); they must meet educational and experience requirements and complete ongoing annual continuing education and conform to all laws and regulations. There are many other roles accountants act in verifying the accuracy of accounting records, income tax planning, and advice on tax law, entity structure, and critical financial decisions.
There is often an overlap between the roles of bookkeepers and accountants. Both provide essential advice to their clients. For example, a bookkeeper may advise how to streamline your accounting processes or create a budget for your business while an accountant may suggest how to minimize your tax liability or help you decide if it makes sense to incorporate your business.
Technology has improved the work processes of both accountants and bookkeepers. Improvements in accounting software have streamlined bookkeeping workloads. Freed from some data entry work, they can now spend more time advising their clients; they know their clients’ businesses in intimate detail, so this makes sense.
Because there are more accounting tools available to them, bookkeepers are also investing more time in training on a variety of solutions. They can then recommend the best technologies for their clients and act as technology consultants.
Tax resolution is a significant focus for many accountants; accountants are typically knowledgeable about their clients’ financial situation as well as their business situation. Many accountants also act as tax coaches and certified financial planners. These two areas of expertise let accountants provide their clients with advanced strategies for their business taxes—making it so the clients can keep more of their hard-earned money in their pockets or set aside for retirement.
As the two responsibilities have such overlap and sharing of roles, some states have placed restrictions on the designations. For example, to be able to call yourself an accountant, you must be a CPA while other states require an accounting degree. Many states do not require any qualifications at all, so ask your provider what training, education, and certification they have earned.
- On the job training experience, bookkeeping training, and certification options
- Well versed in business software solutions
- Cannot do independent audits or attestations
- Knows the financial aspects of their client’s business well
- Usually don’t file tax returns, except for payroll and sales tax
- often have a degree in accounting, many have a CPA designation
- use advanced accounting software solutions for tax planning and financial insights
- If a CPA, can perform audits, attestations, and certified financial statements
- High-level view of the client’s business
- Files both business and personal tax returns
- Aware of the client’s personal finances as well as their business
Periodically, an accountant will review interim financial statements to ensure that any estimated payments need to be adjusted. They might enter monthly or quarterly adjustments for depreciation or expense out any prepaid liabilities, like insurance. Also, they might provide reviewed financial statements in certain situations. For example, if the client is applying for a loan or performing an audit of the financials.
Many small businesses choose to have both a bookkeeper and an accountant. The bookkeeper is in house and manages all the day-to-day financial transactions while watching for changes to the company or any major financial events that should be brought to the business owner’s attention. Bookkeepers are aware of all the processes and know when to bring issues forward to the accountant.
If you want to hire a bookkeeper, accountant, or both, here are some helpful suggestions: ask for a referral from a trusted party, choose someone that you are comfortable sharing confidential financial information with, and look for experience and qualifications. Having both a bookkeeper and an accountant allows your business to have two sets of perspectives on your financials, allowing for a holistic and complete view, which frees you to run your business.