Updated: Sep 17, 2022
Are you looking for effective ways to stay on top of your company’s finances?
If so, then hiring a professional financial expert might be the best solution for you.
However, when it comes to hiring a financial expert, many business owners get confused about whether they should hire an accountant or a bookkeeper.
Many times, these two roles are considered the same and often used as interchangeable terminologies. However, that’s not the case! Bookkeeping and accounting are critical for every business, but they are certainly not the same.
Bookkeeping vs. Accounting
In this article, we will look at a comprehensive comparison between the two so that you are able to understand their differences and similarities and how they can help you with your business.
So, let’s begin right away.
What is Bookkeeping?
Bookkeeping refers to the practice of recording daily financial transactions taking place within a business in an organized and consistent manner. It is essentially a transactional and administrative role that deals with the day-to-day tasks of recording financial transactions of all sizes, natures, and complexity. These recordings may include the purchases made by the company, payroll, sales and payments, invoices, receipts, and so on.
Bookkeeping essentially involves:
· Recording financial transactions
· Posting debits and credits
· Producing invoices
· Preparation of financial statements
· Maintaining and balancing subsidiaries, general ledgers, and historical accounts
· Completing payroll
Responsibilities of a Bookkeeper
Although the primary responsibility of a bookkeeper is to record the financial transactions of a business on a daily basis, they also take care of many other tasks that are crucial to make sure that the business runs smoothly. Some of the most important responsibilities of a bookkeeper include:
· Recording customer payments:
Bookkeepers record customer payments timely and properly to ensure that the accounts receivable balance is accurate.
· Paying Bills and making payments:
Bookkeepers ensure that the company maintains a good relationship with its suppliers and other stakeholders by paying bills and making payments on time.
Bookkeepers monitor sales and produce invoices for the goods and services your enterprise delivers.
· Managing Payrolls:
Bookkeepers may also be responsible for reading timesheets, calculating deductions and overtime, and processing payroll.
· Recording and organizing transactions:
The bookkeeper makes sure to make a record every time money moves in or out of your business accounts in an organized manner.
· Reconciling bank statements:
By reconciling bank statements monthly, a bookkeeper is responsible for minimizing the potential for error while providing an accurate balance.
· Preparing financial statements:
Bookkeepers need to prepare monthly, quarterly, or yearly financial statements depending on your company’s needs.
Bookkeepers may also be responsible for many other tasks and duties within an organization, such as budgeting and convincing investors.
Advantages of a Bookkeeper
Here are the top benefits of hiring a bookkeeper over an accountant for your company:
· Better Organizational services:
The main responsibility of bookkeeping is also its main benefit, which is the organizational service. When you hire a bookkeeper, they keep well-maintained and well-managed records of all your daily financial transactions, giving you easy and quick access to your financial information whenever you need it.
· Lesser cost:
Although the specific amount varies according to the business needs, the wages of bookkeepers are typically lower than that of an accountant.
· Direct evaluations:
Where an accountant offers a detailed assessment of your finances, a bookkeeper can give quick and direct evaluations, helping you make smart decisions at the right time.
What is Accounting?
Unlike bookkeeping, which is a transactional process, accounting is subjective. It involves the use of financial data provided by the bookkeeper to analyze, evaluate, summarize, interpret, and predict the financial stand of an organization. Accounting is the process of creating reports and financial models to provide the business owner with accurate information about their financial status.
Accounting essentially involves:
· Authenticating and evaluating data
· Generating reports, conducting audits, and preparing financial records like tax returns, income statements, and balance sheets
· Providing data for financial forecasts, business trends, and growth opportunities
· Helping the business owners with their financial decisions
· Adjusting entries
Responsibilities of an Accountant
An accountant utilizes the information provided by a bookkeeper and adapts it to a broader perspective, nurturing the decision-making process of the organization. Some of the most important responsibilities of an accountant include:
· Preparing financial statements
Bookkeepers can produce standard financial statements, but accountants generally run these reports. An accountant is responsible for reviewing and analyzing the information provided in the financial statements. If you require a cash flow statement, an income statement, a balance sheet, or any other sort of financial report, you need an accountant.
· Revenue and cost analysis:
Accountants are responsible for examining and understanding the entries made by a bookkeeper. They also use historical data to determine trends that could benefit your company, such as product profitability, decreasing revenues, and increasing expenses.
· Preparing and filing taxes:
Preparing and filing for taxes is the most important responsibility of an accountant. They can help with preparing tax returns as they have knowledge of the IRS, tax planning, tax deductions, and ways to decrease tax liability. An accountant makes sure that there is no error in your tax-filing procedure, minimizing the probability of an audit.
· Financial planning:
Accountants have the qualifications, knowledge and expertise to provide you with specific financial advice and information according to your business needs. They can simplify your financial planning by guiding you on how to cut expenses, increase revenue, and enhance profitability. They can also advise on more complex issues, such as business expansion and structure.
· Applying for Business Loans:
When you work with an accountant, they know about your finances. So, with their knowledge and expertise, they can help you in case you apply for a business loan. They can help you if a lender asks complicated questions about your business’s financial position and performance. They can even guide you about the interest rates, terms and conditions, and so on.
Advantages of an Accountant
Here are the top benefits of hiring an accountant over a bookkeeper for your company:
· Detailed Analysis:
An accountant is qualified and certified to provide you with a comprehensive view and a detailed analysis of your company’s financial standing. In addition, they can also offer financial plans and strategies for better financial decisions according to your business needs.
· Professional Expertise:
Accountants typically need a degree, more schooling, better certifications, and work experience as compared to bookkeepers. Therefore, when you hire an accountant for your company, you usually gain access to much more valuable and better professional expertise regarding financial matters.
· Legal help and guidance:
Better qualifications, certifications, expertise, and experience make accountants more useful for a business as they can also help with legal compliance and regulations. From handling taxes to tackling legal complications, an accountant can help you avoid trouble.
Bookkeeper vs. Accounting: Who Should you hire?
When it comes to employing a bookkeeper or accountant, the answer depends on your business needs. While bookkeepers play a vital role in organizing and monitoring financial records, accountants bring valuable financial expertise to the table.
Many companies prefer working with both of these significant roles, as organized financial records by the bookkeeper combined with expert financial strategies and tax filing by the accountant make the business unbeatable.
If you would like to find out if a bookkeeper can help you. Contact Caboolture Bookkeeping we are here to help! Click Here to get in touch.