Bookkeeping vs Accounting: What’s the Difference?

Before joining the team, she was a Content Producer at Fit Small Business where she served as an editor and strategist covering small business marketing content. She is a former Google Tech Entrepreneur and she holds an MSc in International Marketing from Edinburgh Napier University. Julia is a writer in New York and started covering tech and business during the pandemic.

Accounting focuses on using that data to assess the financial health of a business and make data-driven business decisions. Bookkeepers and accountants share the same long-term goal of helping your business financially thrive, but their roles are distinct. Bookkeepers focus more on daily responsibilities, like recording transactions, while accountants provide overarching financial advice and tax guidance. Your accountant, on the other hand, will be an invaluable resource when it comes to understanding the larger financial picture of your business. Either quarterly or yearly, your accountant will assess your company’s financial statements to help you view a larger picture of your business’s cash flow, as well as any profits or losses.

Common Roles in Bookkeeping

Bookkeepers are well-versed in accounting processes and can perform various accounting tasks. They can prepare financial statements, manage accounts payable and receivable, and even perform some tax-related duties. Accounting clerks need strong attention to detail, proficiency in data entry, and knowledge of basic accounting principles. Bookkeepers, on the other hand, need a deeper understanding of accounting software, the ability to analyze financial data, and good organizational skills to manage multiple accounts efficiently. When it comes to managing financial records, businesses rely on the expertise of accounting clerks and bookkeepers.

• Therefore, professionals in these fields should focus on upskilling and adapting to the technological advancements rather than fearing replacement.
• Accounting clerks and bookkeepers both contribute to the management of a company’s financial records and share the responsibility for documenting, confirming, and reporting business transactions.
• In the world of finance, two terms that are frequently mentioned are bookkeeping and accounting.
• They maintain accurate records of financial transactions, including income, expenses, and bank reconciliations.
• One thing is guaranteed, you will not miss a single thing on-campus housing offers.

Both bookkeepers and accountants may charge a flat rate or, more commonly, by the hour. Accounting also involves reporting these findings to tax collectors and regulators. It’s a process that tells the financial story of your business, including if your business is profitable or if you’re suffering a loss. If you plan to hire a bookkeeper or accountant, make sure to ask your potential hire what they are comfortable and experienced in doing.

I envision a bookkeeper as a person employed by a smaller company and being responsible for recording nearly all of its transactions. Hence, the bookkeeper would likely process sales invoices, customers’ remittances, purchases, payments to vendors, payroll, monitoring receivables, preparing journal entries, and more. Both bookkeepers and accountants need to be comfortable working with numbers all day. Bookkeepers especially should be able to spot issues with daily expenses and make sure all the data points are tracked correctly. A forensic accountant’s job is to investigate, audit, and prove the accuracy of financial documents and dealings. There are opportunities for forensic accountants in many industries, like nonprofit work, government and law-enforcement agencies, law firms, and large corporations.

Moreover, you may need to spend extra money to hire new resources while making your accounting department fully functional. The experience, credentials, and licensing of an accountant determine their additional qualifications. By knowing these, you can delegate tasks properly and ensure that you cover all areas of the business’ finances. They’re in charge of balancing the books, which means carefully recording and monitoring assets, liabilities, and equity. Bookkeepers organize the finances by ensuring that each transaction is well-documented.

Bookkeepers don’t necessarily need higher education in order to work in their field while accountants can be more specialized in their training. Because bookkeepers tend to work for smaller companies, they may not be paid as much as accountants. Knowing the differences between the two can help people find their niche in the industry and can give guidance to companies on who to hire for their needs. Bookkeepers who are interested in switching jobs but do not have a college degree might consider becoming an EA after a stint with the IRS. This job doesn’t require a college degree, only five years of tax experience with the IRS.

The Differences Between Bookkeepers vs. Accountants vs. CPAs

Think of your bookkeeper as the one building the foundation of your businesses finances, and your accountant as the architect who designs a house around it, inspecting the foundation. As your small business grows, the financial side of running a company inevitably becomes increasingly complicated. One of the best things you can do to help manage this important facet is to consider hiring an experienced bookkeeper and an accountant. These complementary allies will help keep track of your business expenditures, income, and profits as well as set you up for success once tax time rolls around.

While they work towards a common goal, bookkeepers and accountants support the business in different ways, and in different stages of the financial process. Data shows that, as of May 2023, the median annual wage for bookkeepers is $42,248 per year. On the other hand, accountants earned a median yearly wage of $58,924 during the same period.

Why People Confuse Bookkeepers for Accountants and Vice Versa

Taking the next step in maintaining your company’s records can seem daunting, but there are plenty of options available that will make it easier for you to stay focused on growing your business. A bookkeeper usually performs these steps, however, an accountant may step in to complete these tasks, or oversee them as they’re completed by the bookkeeper. If all you need is to set up a financial record-keeping system for your new location, you can hire a bookkeeper.

Typical Bookkeeper Interview Questions

Deciding between bookkeeping vs. accounting can be difficult because of the intersecting responsibilities of a bookkeeper and an accountant. Many small and midsize business (SMB) leaders find it challenging to decide who can meet their financial needs. A bookkeeper can be the business owner, an in-house employee, freelancer or professional from an online bookkeeping service like QuickBooks Live or Bench. Some accountants have a bachelor’s degree in accounting but no CPA certification. Forensic accounting combines auditing, accounting, and investigative skills to evaluate a businesses finances and determine any instances of fraud. Having accurate records and an up-to-date awareness of how your business flows on a short-term basis is a key component for deciding where to go next, and that’s where a bookkeeper comes in.

signs you need a bookkeeper or accountant

A CPA is an accountant who has met their state’s requirements and passed the Uniform CPA Exam. They must also meet ongoing education requirements to maintain their accreditation. Each sale and purchase your business conducts must be recorded in the ledger and some items will need documentation. You can find more information on which transactions require supporting documents on the IRS website.

Still stumped on how to handle bookkeeping vs. accounting tasks for your small business? Small business accounting software like QuickBooks helps you track your business finances all in one place, making it easily accessible to you and your accounting team. This individual usually holds an accounting degree and is registered as 10 best accounting tools for small businesses in 2021 a certified public accountant (CPA). To use that title, CPAs must pass the CPA exam—which is a highly valued credential in the accounting industry. Some business owners learn to manage their finances on their own, while others opt to hire a professional so that they can focus on the parts of their business that they really love.