Bookkeeper vs Accountant: What’s the Difference?

When you’re juggling all the operations of your business, it can seem impossible to keep up with your daily financial transactions, financial records, and tax information. To help relieve some of the stress and ensure your data is accurate, you’ve probably been considering outsourcing tasks like payroll, tax preparation, and record keeping, but do you need someone for bookkeeping or should you consider certified public accountants instead? If you’re not sure what the difference is between the two roles, or you aren’t sure which service is right to meet your needs, we can help. Our CPA firm in Raleigh is breaking down the differences between a bookkeeper and accountant to help you choose the right option.

Similarities Between a Bookkeeper vs Accountant

Before we dive into the differences between bookkeepers and accountants, let’s look at their similarities as there are more than you may realize.

• Both work with financial data.

• Accounting knowledge is necessary.

• Both roles work in tax compliance.

  
  

However, at their most basic definitions, a bookkeeper gathers and logs financial records, organizes financial data, and generates financial statements. An accountant analyzes the information the bookkeeper provides to offer guidance, prepare taxes, and make recommendations.

What Does a Bookkeeper Do?

Bookkeeping is more of a clerical role, in which an individual takes on the daily tasks of recording financial transactions. This can include purchases, sales, expense receipts, payments, and any other data. They often maintain the general ledger, provide data entry, and generate financial reports, like the cash flow statement, income statement, or balance sheet.

Much of a bookkeeper’s job is dependent on the needs of the business. For example, you may only need the most basic support for daily transactions and data entry. However, other bookkeepers may assist with generating invoices and collecting payments as well as recording financial transactions and filing them into your financial database.

Advantages of a Bookkeeper

While many business owners choose to do their own bookkeeping either using bookkeeping software or a DIY approach, let’s look at the advantages of outsourcing this task to a professional.

• Saves hours of work each week that could be spent on other operational tasks.

• Minimizes errors and ensures your financial data is accurate and well organized.

• Makes tax preparation easier to complete and your returns more accurate.

• Improves the outcome of a financial audit by having the records easy to access, understand, and review.

  
  

What Does an Accountant Do?

Where a bookkeeper starts is where the accounting process begins. Basically, an accounting professional takes the financial data that the bookkeeper has been gathering and analyzes the information to provide the business with a better understanding of its financial position. More specifically, a certified public accountant can help a business with:

• Summarizing the economic performance

• Reporting financial information and status

• Forecasting future revenue based on previous trends

• Creating budgets that will keep a positive cash flow

• Determining when it’s time to expand or increase

• What aspects of the business are most or least profitable

• Whether or not the business is operating at a profit or at a loss

• Determining if the business should establish a line of credit or take out business loans

• Generating financial reports

In addition to these analytical tasks, an accountant can also provide tax advice and preparation services that will save the business owner time, improve accuracy, and can often save a significant amount of money by finding ethical tax deductions and credits to reduce their payments.

Advantages of an Accountant?

Many small business owners consider using accounting software rather than hiring an accounting professional or investing in accounting services. However, it’s important to consider the benefits of working with a certified public accountant.

• Like a bookkeeper, hiring an accountant frees up time that allows you to focus on operations, growth, hiring, and serving your customers.

• Minimize your tax burden by working with an experienced accountant who understands and leverages available tax credits and deductions.

• Provides you with a clear, in-depth understanding of the overall financial health of your business so you know when you can grow, when to scale back, and the steps you can take to protect your financial standing.

• An accountant can help you prepare and analyze your financial statements which you will need along with other financial documents to secure a line of credit.

Are Bookkeepers Accountants?

Many accountants do offer bookkeeping services as there is a great deal of overlap between the two roles. However, a bookkeeper can not do the role of an accountant in most cases. Bookkeeping is more of a clerical and administrative role, whereas accounting is more analytical. Also, to be a certified public accountant, you must have a four-year bachelor's degree and pass an exam in order to be licensed.

Choosing a Bookkeeper vs Accountant

When you're debating between bookkeepers and accountants, it really depends on what your business needs. While bookkeeping services are less expensive and are ideal for daily data entry and transactional processing if you plan on growing or scaling your business, working with an accountant may be more beneficial to your long-term goals. It’s also important to determine the complexity of your business tax returns and your financial systems.

Most businesses benefit from both a bookkeeper and a certified public accountant.

Schedule a Consultation to Discuss Your Bookkeeping And Accounting Needs

If you are ready to outsource your accounting and bookkeeping tasks to an experienced accounting professional, schedule a consultation with McNeill Financial Services today.