Learn the responsibilities of bookkeepers and accountants to know the right fit for your business needs.
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.
Finding the answer is important, especially if you can't manage finances internally and are looking for external help. A recent Gartner survey revealed that 53% of respondents who used accounting services searched for a service partner because they didn't have the bandwidth—even though they have in-house expertise.[1]
Hiring an experienced third-party service provider helps businesses save time and internal resources for other priority tasks.
In this guide, we'll discuss the difference between bookkeeping and accounting and the responsibilities of a bookkeeper and an accountant so you can better understand your needs and hire the right fit for your business.
What is accounting?
Accounting refers to methods of recording, summarizing, analyzing, and reporting financial transactions for an organization or business. Accountants analyze financial metrics to assist businesses with better decision-making.
What does an accountant do?
An accountant records, analyzes, and interprets financial information and transactions. They typically present insightful financial data to stakeholders and other decision-makers, who use it to steer the business in the right direction.
For example, a car manufacturer aims to save two percent on car production costs over the course of the next fiscal year. Managers can hire an accountant to know how much it costs to produce each vehicle.
The data provided by the accountant can be shared across departments, paired with a request for each one to ideate ways to shave a few tenths of a percent off their current costs. The information derived can be used to make actionable, financially sound business decisions.
Common accountant responsibilities
Accountants are held responsible for various financial tasks. Here are some responsibilities that most accountants need to handle:
- Maintain financial records: Accountants record and maintain financial transactions for businesses, including tracking expenses, assets, liabilities, income, and other financial metrics using ledgersA ledger is a running tally of money coming in and going out from a specific account..
Analyze finances and set internal controls: Accountants interpret financial statements to understand trends, which helps them provide meaningful insights to business decision-makers. Businesses often deploy accountants to set up internal governance policies that may prevent any over-or-under spending.
Prepare financial statements: Accountants are often responsible for preparing balance sheets, cash flow, income statements, and tax documents. Businesses use this data to fulfill reporting requirements and comply with regulatory standards.
Forecast and set budgets: An accountant can help set a budget for the company, a project, or a department. They can also make budget forecasts, allowing businesses to better prepare for financial challenges, including tax issues and market fluctuations.
Provide compliance consulting: Accountants can be powerful resources to help businesses meet legal compliance standards. The financial insights provided by accountants can be used to comply with anti-money laundering requirements and tax filings.
While an accountant can fulfill several roles, every business may have unique requirements. Hence, it's best to inquire about an accountant's skill set before hiring them.
Narrow your search for accounting firms with our list of companies in the following areas:
What is bookkeeping?
Bookkeeping is the discipline of collecting, organizing, and maintaining financial records and transactions. A bookkeeper is responsible for setting up an entire infrastructure for the financial records of a business' operations.
What does a bookkeeper do?
A bookkeeper keeps track of financial records and transactions. This function of bookkeeping involves carefully establishing and maintaining financial reports for various transactions. Hence, a bookkeeper takes control of the financial documentation process.
Some typical bookkeeping tasks involve:
Record financial transactions: Bookkeepers keep track of a business' financial transactions, including sales, purchases, payments, expenses, or payroll.
Maintain ledgers: Ledgers help businesses record transactions for different accounts. Some businesses may choose to have a bookkeeper generate ledgers for each of their clients.
Reconcile accounts: Account reconciliation ensures all recorded business transactions have valid proofs that can be matched using receipts and other documentation.
Process payroll: You may designate a bookkeeper to record and process payments to associates.
Record accounts receivable and payable: A bookkeeper can design systems for tracking money owed and received.
Difference between bookkeeping and accounting
The primary difference between accountants and bookkeepers is that bookkeepers focus only on documenting financial information and transactions, while accountants provide advisory and analytical services.
This doesn't mean bookkeepers are any less adept than accountants. Some of them can produce financial documentation solutions that far surpass those you'd get from a typical accountant.
On the other side of the coin, accountants can also provide more than adequate financial documentation, and it's a core element of their work.
Accountant credentials differ from those maintained by bookkeepers. For example, certified public accountants (CPA) meet certain educational and experiential requirements and can perform audits, provide tax advisory services, or give financial advice.
If you plan to hire a bookkeeper or accountant, make sure to ask your potential hire what they are comfortable and experienced in doing. Also, ensure that their offerings align with your business needs and can help you achieve desired results.
How to decide if you need a bookkeeper or accountant
If you don't have a financial recording and reporting system in place but have a firm grasp on how you'll be spending money, you need a bookkeeper. However, if you want someone who can analyze your finances and provide advice, you’ll need an accountant.
Let's simplify decision-making with an example. Suppose you run a restaurant and plan to open another outlet. Your current financial records support this business decision. You are able to assess your finances, including tax obligations, and make timely payments.
If all you need is to set up a financial record-keeping system for your new location, you can hire a bookkeeper.
But suppose you feel you can improve your financial decision-making process and want to make some adjustments so both restaurant outlets can benefit from an improved system. In this situation, you'd need an accountant.
Your accountant can analyze your current financial decision-making process and recommend ways to better incorporate financial data. They can also walk you through a few financial decisions to recommend new ways of approaching a situation.
Further, you can keep your accountant on retainer, asking for their help as you open your new location and deal with any curveballs that come your way.
As the function of accounting is typically more diverse than bookkeeping, hiring an accountant may allow you some flexibility.
Explore accounting services firms
Accountants and bookkeepers provide similar services, but accountants can also provide financial advice where bookkeeps can't. Bookkeepers can be an effective resource if you need to design a financial recording system—even when you have a relatively complex business.
Once you pinpoint which kind of professional you want to hire, make sure you understand how accounting firms work and how to choose the best solution for your financial needs. These resources can help: