The average person might use the terms “bookkeeper” and “accountant” interchangeably. But while these are both finance-related jobs and share similarities, these positions are distinct from one another in some important ways.
If you’re a new business owner or have been thinking about hiring someone to help with your financial organization and strategizing, the differences between a bookkeeper and an account will be especially relevant to you. You’ll want to become familiar with the two roles so that you can determine whether you need to consider hiring a bookkeeper, and accountant, or both of these professionals to meet your personal or your company’s financial needs.
Data Collection vs. Data Analysis
A bookkeeper is, as the name suggests, someone who “keeps the books” for your company. A bookkeeper’s tasks generally involve recording financial transactions, managing payroll, creating invoices, posting debits and credits and generally keeping a detailed record of where your company’s money is at all times. It is an important job, and is best done by someone who is good at math and fastidious about details. In different terms, a bookkeeper can be thought of as someone who collects data.
An account, by contrast, serves primarily as a data analyst. This professional takes the data provided by a bookkeeper and interprets it to give clients a clear picture of how their finances are operation. Accountants can also advise on or model future financial decisions. Accountants handle bigger-picture tasks including preparing financial statements, determining operational costs, and helping business owners understand the potential impacts/outcomes of financial decisions (financial forecasts). Many accountants also file business income tax returns and create tax planning strategies.
In short, a bookkeeper can explain to you how much money/debt you have and where it is allocated. An accountant can tell you what this means for your financial future and help you cut costs or increase profits.
Education and Credentialing
One of the reasons that it’s important not to confuse bookkeepers and accountants is that some accountants may be offended if they are called bookkeepers. To become an accountant, one must generally have a bachelor’s degree in accounting or hold a different degree in the field of finance. With time and additional education, many accountants continue to earn professional certifications. A Certified Public Accountant, for instance, needs to have experience as a professional accountant and pass a rigorous exam.
A bookkeeper does not need formal training or certification, nor are they allowed to refer to themselves as accountants. It needs to be emphasized that bookkeeping is still a very important job that requires responsibility, organization and financial literacy. Bookkeepers often work for accountants, and they provide the raw data that accountants need in order to do their jobs. Bookkeepers can pursue certification if they choose to.
Which One Do You Need?
If you are a business owner and you understand that you need help tracking and managing finances, you may be asking, “Now what?” Should you hire a bookkeeper or an accountant? Do you need both?
If conditions were ideal, a business would be able to afford both a bookkeeper and an accountant. But for startups and relatively young businesses, this kind of access often isn’t a possibility. In some cases, one person can take on both roles, but even that kind of service may be too expensive for your business at this moment in time.
The good news is that some of this work can be outsourced. There are many online bookkeeping services and programs that can help you track your company’s spending, earnings and financial allocations. Bookkeeping programs, like QuickBooks, are DIY options that make it easy for you to keep the records yourself. They are generally very affordable for businesses of all sizes. Bookkeeping services are websites that offer online bookkeeping and related support for monthly subscription fees. They are likely to be significantly more expensive than online bookkeeping programs, but may be less expensive than hiring an individual bookkeeper. If your company’s finances are complex, outsourcing bookkeeping services with a knowledgeable company can be a critically important investment. You can’t know how to plan for the future unless you have accurate data concerning your operations.
The role of an accountant requires more subjective judgment and professional interpretation, which is why it is generally important to work with an accountant directly. Your company will need both bookkeeping and accounting services available to you, but much of bookkeeping can be automated. The same is not true for accounting.
Financial Guidance Is Available
Benefit from bookkeeping or accounting guidance, please consider scheduling a consultation with the professionals at LawTrades today. Once we learn more about your needs, we can advise you of the options that will best serve your company. We look forward to speaking with you about your financial needs and how we may be of service to you.