Bookkeeper vs. Accountant: What’s The Difference?

Within the constant hustle of running either a small or big business, a not-so-attractive task of expense and accounts tracking is often easy to ignore. This happens until the gong of tax season rings, making businesses keep a hawk’s eye on everything related to business finances.

On one side, employees are working hard to gather, update, and report various business expenses. On the other side, there are internal or external finance folks validating and approving different heads of expenses.

Amidst loose policies, strict deadlines, and a never-ending pile of financial data, many of us fail to look at the fundamentals of bookkeeping and accounting.

A major debate in this aspect is around the topic of bookkeeper vs. accountant. When we want to get things done at work, we want them both.

But not everyone knows about the thin line that separates the work responsibilities of both a bookkeeper and an accountant.

How do you see these two roles as a part of your business? While both these roles share many common goals pertaining to a business, they lie at different stages of a financial cycle.

This blog post will take you through the bookkeeper vs. accountant comparison to help you better understand the differences.

Accounting and Bookkeeping: Definitions

Accounting refers to the process of arranging the financials of a company by recording, analyzing, summarizing, and reporting the data. In simple words, accounting turns financial data into useful information.

It is more subjective and gives insights into an organization’s financial health. It is usually done by Certified Public Accountants, popularly known as CPAs.

Bookkeeping, on the other hand, is a crucial part of the accounting process that keeps records related to day-to-day transactions, such as receipts, sales, payments, or purchases.

This is handled by bookkeepers who do not generally require a license but can obtain a certification depending on their location and that of their employer. In comparison to accounting, bookkeeping is more administrative and transactional in nature.

Key Takeaway:

A bookkeeper handles the day-to-day recording of financial transactions related to a business, while accountants provide detailed insights into that data/records and generate accounting reports.

Let’s dive further into the details.

What Does a Bookkeeper Do?

The primary job of bookkeepers is to maintain comprehensive records of all funds coming in or going out of a business. They record daily transactions in an easy-to-read, consistent way, which are then used by the accountants to take things forward.

Some of the common bookkeeping tasks involve posting credits and debits, recording financial transactions, creating invoices, managing payroll, and balancing ledgers and accounts.

Here, ledger maintenance is a crucial task out of all others. Ledger refers to the document that contains records of sales and expenses.

It can vary in complexity, ranging from a simple sheet of paper to advanced bookkeeping software like QuickBooks to track all entries.

An individual does not necessarily need any formal education to become a bookkeeper but must have knowledge of accounting terms and finances.

However, licensing and accreditation are available via the National Association of Certified Public Bookkeepers (NACPB) and the American Institute of Professional Bookkeepers (AIPB). Keep in mind that a bookkeeper is not an accountant nor should he/she be considered like one.

Besides this, bookkeepers also need at least 2,000 hours of work experience and pass an exam to earn the license of a certified public bookkeeper. The cost of hiring a bookkeeper mainly depends on the services you want and the level of expertise you need.

What Does an Accountant Do?

Accountants are responsible for analyzing the financial data recorded by bookkeepers and providing businesses with important insights and advice regarding business decision-making.

Some of their common day-to-day tasks include verifying books, performing audits, generating reports, and preparing records like income statements, tax returns, and balance sheets.

They also provide data on current business trends, forecasts, and growth opportunities. The reports they create bring together key aspects of organizational finances to help business owners know:

• Where the finances stand

• What they imply

• What the business owners should about them

• You should also know that an accountant is not the same as a CPA. While many of them can be hired to prepare tax returns, CPAs have more knowledge about various tax codes and are eligible to represent a business if it gets audited by the IRS.

• An accountant becomes a CPA after passing a challenging Uniform CPA exam that tests the knowledge of standard accounting and tax laws.

In terms of credentials, accountants must have a bachelor’s degree from an accredited university or college. Furthermore, one may choose to obtain various accounting certifications such as Chartered Financial Analyst (CFA) or Certified Internal Auditor (CIA) to expand the skill set and work for bigger organizations.

Bookkeeper Vs. Accountant Summary

Bookkeeper	Accountant
Is responsible to record and categorize financial transactions	Works on adjusting entries
Work on posting credits and debits	Works on creating financial statements
Produce and send invoices	Prepares and completes income tax returns
Work on maintaining subsidiaries, historical accounts, and general ledgers	Carries out financial analysis and strategic planning
Also works on payroll	Defines tax planning and strategy
Can also be referred to as a record-keeper	Also work on financial forecasting

Bookkeeper Vs. Accountant: Do You Need One of Them or Both?

Before you jump to the hiring decision, you must understand whether to hire a bookkeeper or an accountant. The choice here primarily depends on the level of accounting expertise your business requires being a part of a specific industry.

You need a bookkeeper when you only want to handle daily transactions. Since that is not enough for almost every type of business, you will need both an accountant and a bookkeeper. Here’s what you need to check before hiring any professional in these fields:

• Knowledge of the accounting procedures/requirements pertaining to your industry

• Understanding of paying invoices, receiving payments, and monitoring inventory

• Industry-specific reporting requirements

At large, it can be difficult for many business owners to gauge the right time to hire these professionals. For example, many small business owners handle their books by themselves and only hire an accountant to work on data analysis periodically.

In general, it is never too early to hire an accounting professional to save you time and money. Alongside, having a bookkeeper will allow you to focus on the business operations and growth.

Besides having human expertise, you will also need accounting software to allow your team to track and manage expense reports, inventory, invoices, etc. efficiently. With the easy availability of multiple accounting software, you can choose the one that fits your budget and business accounting needs.

Switch to the Cloud for Accounting and Bookkeeping

Whether you hire a bookkeeper or accountant for your business needs, the need of the hour is to allow them to work on the cloud.

It helps protect the business-critical financial data that your business holds, thereby mitigating various disastrous cybersecurity events.

As a result, it will protect the reputation of your business in the long run.

Even if you switch to using accounting software, you can host it on the cloud with the help of a renowned cloud hosting provider like Ace Cloud Hosting.

They are known to offer the best-in-class cloud infrastructure in the form of affordable cloud hosting plans. Other benefits of switching to cloud-based accounting include:

• Remote software and data accessibility

• Enhanced security of data backed by multiple measures like data encryption, IDPS, firewalls, and others

• Round-the-clock hosting support to resolve any query that may arise

• Business continuity and disaster recovery benefits