What is the Difference Between an Accountant and a Bookkeeper?
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There is often confusion about the difference between an accountant and a bookkeeper. Many people assume they are the same thing, but this is not the case. In fact, accountants and bookkeepers typically have different roles in small businesses. Let's take a closer look at what each position entails.
What is a Bookkeeper?
A small business bookkeeper records day-to-day financial transactions for a business. This includes recording sales receipts, paying bills, and tracking bank deposits and expenses. They do not typically have a college degree but may have certifications from the American Institute of Professional Bookkeepers.
What is an Accountant?
An accountant is someone who prepares financial statements for a business, provides tax advice, and analyzes the data that the bookkeeper is tracking. They typically have a college degree in accounting or a related field.
Related Reading: Do I Need an Accountant for my Small Business?
What is the Main Difference Between a Bookkeeper and an Accountant?
The main difference between a bookkeeper and an accountant is that bookkeepers focus on recording transactions while accountants focus on analyzing them.
In short, a bookkeeper’s job is to ensure that all of a business's financial transactions are properly recorded in the company’s books. Once all of the transactions have been recorded, the bookkeeper will prepare various financial reports that will be used by the business owner or their accountant. In most cases, an accountant’s job is to analyze the financial reports prepared by the bookkeeper and provide advice on how the business can improve its financial health. Let's take a closer look at each of these rolls within a business.
Common Duties That Bookkeepers Perform for Businesses
1. Maintaining Financial Records
One of the primary duties of a bookkeeper is to maintain financial records. This includes keeping track of income, expenses, and other financial transactions. Financial records are important for both tax purposes and for monitoring the financial health of a business.
2. Preparing Financial Statements
Another duty of a bookkeeper is to prepare financial statements for the accountant to analyze. Bookkeepers typically prepare monthly or quarterly financial statements.
3. Processing Invoices
A bookkeeper is also responsible for processing invoices. This includes ensuring that invoices are accurate and that payments are made in a timely manner. Invoice processing can be a time-consuming task, but it is important for keeping the finances of a business in order.
Related Reading: Do I Need a Bookkeeper for my Small Business?
4. Reconciling Bank Statements
Reconciling bank statements is another common task for bookkeepers. This involves comparing the transactions listed on a bank statement with those recorded in the financial records. Reconciling bank statements helps to ensure that all transactions are accounted for and that there are no errors in the records.
5. Assisting with Tax Preparation
Another common duty of bookkeepers is assisting with tax preparation. This includes gathering all relevant documentation, such as receipts and invoices, and organizing it in a way that makes it easy for the accountant to prepare the tax return. The bookkeeper may also be responsible for ensuring that all tax deadlines are met and that any tax owed is paid on time.
A bookkeeper for a small business can also be responsible for payroll. However, this is something that an accountant can also do if the business doesn't have a bookkeeper. This includes calculating employee wages, withholding taxes, and issuing paychecks. Platforms like Gusto make payroll a breeze for small businesses!
Common Duties That Accountants Perform for Businesses
1. Analyzing Operation Costs and Financial Statements
One of the primary duties of an accountant for a small business is to analyze financial records, like your balance sheets and cash flow statements, to understand the business's financial health.
2. Tax Preparation
Another key duty of an accountant for a small business is tax preparation. This includes ensuring that all required taxes are filed in a timely manner and that any owed taxes are paid. Tax preparation can be complex, so it is important to have someone with experience handle this task.
3. Advising on Financial Matters
An accountant for a small business also advises on financial matters. This may include providing guidance on reducing costs, improving cash flow, or making other financial decisions to support business growth. An accountant can be a valuable resource for a small business owner who wants to ensure that their company is financially successful.
Do I Need Both an Accountant and a Bookkeeper?
In truth, both roles can be important and may depend on your business's specific needs. When it comes to managing the finances of a small business, some business owners choose to do everything themselves. However, this is not always the best approach, and seeking professional assistance can often be helpful.
For example, if you are starting a new business, an accountant can help you establish financial systems and ensure that you comply with tax laws. On the other hand, a bookkeeper can help you maintain day-to-day financial records and prepare financial statements.
As your business grows, you may need an accountant and a bookkeeper to keep your finances in order. Ultimately, the decision of whether to hire an accountant or a bookkeeper (or both) depends on the specific needs of your business.
Recommendations for Hiring Your Next Bookkeeper or Accountant
When it comes to your small business financials, you can do it yourself, hire in-house, or outsource the work to a professional. Each option has its own advantages and disadvantages, but if you're looking for the most efficient and cost-effective solution, outsourcing your bookkeeping and accounting can save you time and the headache if you aren't sure where to get started.
Here are two companies we recommend when you are thinking about outsourcing:
xendoo has a trusted team of expert bookkeepers, accountants, and CFOs to navigate the complexities of your growing business. Their bookkeepers stay up-to-date on the latest reporting requirements and will keep your books clean and organized. And their accountants will have you tax-ready all year long and can help with your personal taxes too.
Outsourcing can free up your time so that you can focus on running your business and saves you money on the costs associated with hiring an in-house bookkeeper.
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