There are two roles that play a big role in managing your business’s finances, and those are the roles of a bookkeeper and an accountant. Let’s explore the difference between the two and why it matters for your business.
Bookkeepers and accountants are similar in the sense that they both can prepare your financial statements; however, there are some distinctions.
What is a bookkeeper?
Bookkeepers are responsible for accurately recording and categorizing every transaction your company has to keep your financial books, "records," up-to-date in order to help you make sound business decisions and prepare for income taxes.
Here’s what bookkeepers usually handle on a daily basis:
Recording transactions—All incoming and outgoing sales, purchases, etc.
Categorizing transactions—Properly categorizing each transaction to be recorded correctly.
Bank reconciliations—Reconciling each bank and credit card on a monthly basis to ensure all transactions have been recorded and recognized.
What is an accountant?
Accountants will analyze the records your bookkeeper creates to provide you strategic advice that may be related to your company’s growth, planning, strategic decision making, taxes, etc. Your accountant should really look at the big picture and help you thrive in whatever situation you may be in. An accountant is usually more qualified than a bookkeeper.
Here’s what an accountant usually handles:
Financial analysis—Analyzing trends and patterns is a trait accountants have to be able to provide the strategic advice that will help you grow.
Strategic advice—Your accountant should have deeper knowledge to help guide strategic business decisions such as asset acquisition, cost management, and budgeting.
Tax planning—Preparing for tax season and planning ahead makes a big difference for your company’s outlook.
Auditing—Reviewing all financials internally on a periodic basis is important to make necessary adjustments, ensure accuracy, and verify legal/IRS compliance.
Preparing financials for tax preparation—Having the financials ready for tax preparation is an important step that will determine how easy and accurately your tax filing becomes. The main financials used are the balance sheet and the profit and loss statement.
Summary of Key Differences:
Knowledge: Bookkeepers focus on accuracy to ensure timely recording of transactions. Accountants have greater knowledge to be able to provide you analytical and strategic advice.
Skills: Bookkeepers have the knowledge to operate the software needed to keep track of your books. Accountants have a broader understanding of accounting principles and functions.
Scope of work: Bookkeepers manage the day-to-day transactions. Accountants analyze the results to make informed decisions.
Why does it matter for your business?
Both bookkeepers and accountants are vital functions for a company to thrive. It’s important to know the distinction between the two in order to hire the right help needed for your business. Small businesses may be able to get by with a bookkeeper and yearly tax preparer. However, as the company grows, an accountant can play a vital role in truly helping you thrive, gain company insights, and plan ahead.
It's a great advantage to have the benefit of the services both a bookkeeper and accountant may provide. Ideally, you will find someone or a team who can do both!
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