Many people assume that bookkeepers and accountants are the same thing. But their credentials, responsibilities, and businesses are different. Accountants and bookkeepers often work together to support other aspects of the company. It will happen during various financial stages. The accountants handle the analytics. However, bookkeepers are responsible for recording monetary transactions.
Accountants help you understand your business' finances and how to make the most of your money, whereas bookkeepers record your business's financial activity. Bookkeepers can only be accountants with 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.
Understanding the Role of Accounting and Bookkeeping
Accounting and bookkeeping serve distinct. But, it is a complementary function in managing your business finances. Let's explore it.
Bookkeeping is regular record-keeping of finance transactions. It includes tasks like recording sales, expenses, etc. Bookkeepers ensure all financial data. They are entered and categorized. Accounting builds on the basement of bookkeeping. Accountants analyze the recorded data. It also generates financial reports. After all, it identifies trends and interprets the economic health of the business.
Accurate financial records are essential for accounting. They clearly show your business's economic performance. It can also show profitability and cash flow. It empowers you to make strategic decisions. This helps in maintaining compliance. You can make data-driven choices regarding investments, resource allocation, etc. It can be done with a precise grasp of your finances. Also, these are essential for meeting tax filing deadlines. This avoids penalties, too.
Quick differences between accounting and bookkeeping
Before diving into the 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's 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
Bookkeeping & Accounting: Basics
Bookkeepers and accountants often work together to maintain their client's financial records. Your business could benefit from a finance team. It involves accountants and bookkeepers. Your bookkeeper can produce and keep track of invoices, ensure all financial transactions are correctly 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 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 by using paper and pen, creating a spreadsheet through Microsoft Excel or Google spreadsheets, or specialized computer software.
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 organizing adjusting entries or expenses that have not yet been reported by your bookkeeper
You can make better financial choices to help catapult your company to success. It will happen when you are ready to examine the big picture of your business’s economic situation. After all, your accountant will be there to forecast and help you maintain a path of progress.
Accountants vs. bookkeepers
Accountants and bookkeepers can work together for your company’s financials. They often offer the same services for e-commerce businesses. Bookkeepers are there to ensure financial transactions don't slip through the cracks. Accountants have the authority to advise you on tax matters. It analyzes your business finances and offers consulting services.
What does an accountant do?
Unless your accountant doubles as your bookkeeper, they can only get started analyzing your transactions and data once 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
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.
How accountants charge for their services
The amount you can expect to spend when you hire an accountant varies. It is widely depending on your geographic location, the complexity of your tax situation, etc. Other things depend on how much experience your accountant has, whether they have a full roster of existing customers, etc. 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. You could pay a fixed rate for specific services or an hourly rate. It depends on whether you hire a private accountant or work with an accounting company.
Benefits of Accounting
Benefits |
Examples |
|
Save your time |
Of course, the most obvious benefit is that it can free you up to focus on other daily obligations. It involves those who produce income properly. However, detecting a respectable accounting firm to lend you a hand also takes far less time than searching for, hiring, and training an in-house accountant. |
|
Save your Cash |
Hiring an accountant is affordable. It evades the need to budget for office stocks, taxes, employee benefits, accounting software, and other expenses. |
|
Make it easier to scale |
Your accounting requirements will also change as your business grows and changes. However, creating a full-fledged internal accounting department may be challenging. |
|
Reduce Mistakes |
Financial recording errors can be easy to make if you're not an accounting expert. These can result in overpaying taxes or, even worse, underpaying, etc., and can even get you fined by the IRS. For many growing businesses, having experts on their side is an essential layer of protection against such issues. |
What bookkeepers do
Bookkeepers play an integral role in how well businesses maintain their records. The bookkeeper is responsible for ensuring 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 interpret this data.
Bookkeeper rates and fees
Bookkeeper rates are typically more cost-effective than accountant rates. This is because accountants have higher 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 does the bookkeeper need 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
Benefits of Bookkeeping
Benefits |
Examples |
|
Cost-effective |
Hiring a bookkeeper is affordable. Here, the business owner shall only pay for the needed services. |
|
Saves time |
Bookkeeping allows small business owners to monitor their business. It evades spending time on bookkeeping tasks. |
|
Access to expertise |
Bookkeepers often have specialized knowledge of bookkeeping practices. They provide valuable insights for small businesses. |
|
Improved accuracy |
Professional bookkeepers are trained to maintain financial records accurately. It will reduce the risk of errors. |
|
Scalability |
Bookkeeping services can quickly adapt to your needs. It provides scalability without hiring additional staff. |
|
Enhanced security |
Bookkeeping with a provider can add safety to your financial data. It also protects it from potential breaches. |
|
Compliance with regulations and tax requirements |
Expert bookkeepers are well-versed in tax laws. They ensure your business stays compliant. It also evades costly penalties. |
Winding Up Note
Hire an accountant first if you are a business owner looking for tax guidance. However, hiring a bookkeeper could be better if you are more interested in keeping track of day-to-day finances. After all, stay as organized as possible so your financial professional can handle your business' finances.
Fino Partners provides the full spectrum of consulting, calculation, and compliance. In Fino Partners, your entire process is managed by seasoned professionals. Experts with collective tax knowledge do it from start to finish. Get in touch to work with a transparent company with the expertise to take sales tax off your plate if you're curious for more information! Contact us today!
