Many business owners take an aerial perspective to finance.
And from a bird’s eye view, some of the most essential services can look exactly the same.
“They all deal with numbers . . . So how different can each role be?”
I hear this all the time from clients, who are quick to dismiss distinctions as industry-specific nuances.
But when you pull out your magnifying glass, you’ll soon discover there’s a world of difference between their skill sets and responsibilities . . .
And that’s especially true when we’re looking at bookkeeping versus accounting services.
I’ve worked with hundreds of entrepreneurs who mistake them for being the same thing, when in reality, there’s a stark contrast between them.
Ready to clear up those misconceptions?
Let’s dive into a firmer definition of both . . .
And soon you’ll see why it’s so important you understand each role.
A Day in the Life of a Bookkeeper vs. Accountant
The day-to-day tasks of a bookkeeper revolve around organization, while the day-to-day tasks of an accountant focus on more strategic elements of the business, such as tax planning. Here’s a day in the life for each:
- A bookkeeper keeps clean records of the daily transactions of your company, including bill payments, payroll, billing, and reconciliations. Their role is to produce financial statements they can provide to your CPA. The bookkeeper will keep your company’s general ledger, which is a basic document for recording all sales and expense receipts. And depending on the size of your business and its daily activities, your general ledger will vary in complexity.
- An accountant focuses on the bigger picture of your financial health and tax positioning. After receiving key financial statements from your bookkeeper, your CPA can conduct audits and assist with tax planning and filing. This kind of preparation is critical for businesses that want tax season to be smooth sailing. (Who doesn’t!?) What’s more, your CPA can also help identify the optimal legal structure for the kind of business you’re running.
Now, here’s something to consider.
The bookkeeper and the accountant have a symbiotic relationship . . .
Because the more accurate your books are, the less time your accountant will have to spend tinkering with the numbers. And ultimately, that means you’ll spend less on getting an accurate depiction of your finances.
What Level of Education is Required for Each Role?
The fact is, anyone can be a bookkeeper. And if you ask me, that’s a scary proposition.
Because here’s the thing . . . .
The role of a bookkeeper requires enormous attention to detail, extreme organizational skills, technological competency, and above all, an unshakable sense of integrity. So when you hire for this role, you must do your due diligence.
For someone who wants to pursue a career as a CPA, the route isn’t quite so simple. This path requires strict educational requirements as well as a state license to practice.
OK, But Do I Actually Need a Bookkeeper or Accountant?
Now that you understand the difference between bookkeeping and accounting, it’s time to assess exactly what your business needs.
Making that decision comes down to multiple factors, including:
- The current size of your business
- The complexity of your organization
- Your own skills as a business owner
For smaller businesses, you might be able to manage your own books and taxes in the beginning.
But the hope is to scale your business, right?
And to effectively manage all the financial pieces as your business grows, you’ll want to hire an expert to take over the process.
No matter how you choose to deal with your bookkeeping and accounting, the most important thing is to make sure you’ve got a cohesive team in place.
The more you understand about each position, the easier it will be to maximize each person’s skill set.
That way, they can contribute to your business’ financial health as a whole.
Ready to grow business with the help of an expert? Hire a professional today.