Accountant & Bookkeeper: What's the difference?
In my experience, many people equate accountants and bookkeepers as being the same. While some of their roles can certainly overlap and they share common goals, they do provide different services. Both roles are integral pieces to your business.
Traditionally, bookkeepers provided the foundation of recording and classifying financial transactions, reconciling bank accounts, and keeping the ledgers and journals maintained to correctly reflect the reality of the business’s finances.
The ledger is usually a part of software that a business uses to keep its books today, but it used to be a paper book where each transaction (purchases and sales) was kept in its simple form, while the journal is where the minute details were recorded.
There is a myth that bookkeepers do not require any special special skill sets, but truth be told, it is important that they understand both the bookkeeping process and the specific software to do the job efficiently and correctly. Without this understanding, the bookkeeping will be poor and not reflect the reality of your business, which can cost you money when clean up of previous work is required. A great reason to look seriously into having a professional bookkeeper help your business.
With the advent of online bookkeeping, bookkeepers can also pull financial statements and make basic analyses to help you guide your business, along with creating a budget based on past data metrics. Other bookkeepers also expand their rolls to handle sending invoices (accounts receivable), paying bills (accounts payable), and payroll.
Accountants take the financial information that the bookkeeper has entered and uses that to create financial models. They analyze the cost of operations, prepare financial statements, complete income tax returns, and provide feedback on understanding how specific financial decisions will affect the business.
By using financial information collected correctly by bookkeeper, the accountant can provide key insights, help with strategic tax planning, certify financial statements that can be used with banks and other lenders.
There is a myth that all accountants are great at bookkeeping, but the reality is that they focus their work on the analyzing and tax preparing side of the equation and may not be that good at the bookkeeping part. Some accountants may understand the process but not the finer details of how to fully utilize the bookkeeping software.
There are accountants who keep bookkeepers on staff so that you get both under one house, but keep in mind they may not specialize in your industry, which could make a difference. Whether you hire them separately or together, remember that your bookkeeper and accountant work together to best serve the financial needs of your business.