Building a business takes hard work, but at the end of the day, you like to see your bottom line reflecting a profit as evidence of all your time and effort. Still, as your business grows, you may find there is less time for you to sit down and “do the books.” Outsourcing this financial administration might seem like a good idea, but do you need to hire a bookkeeper or an accountant?
Let’s dive into the differences between an accountant and a bookkeeper, as well as how they can each benefit your business.
What is a Bookkeeper?
A bookkeeper is a professional who manages your company’s financial transactions and categorizes them. With an efficient bookkeeper in place, a business can ensure accurate recording and management of its financial assets and liabilities. Having financial statements that are accurate and up-to-date also can assist in creating financial strategies for the business, such as where to allocate extra revenue and other resources.
Clearly, the duties of a bookkeeper involve making sure that every transaction is recorded, thus allowing for the tracking of all financial information throughout the organization. Here are just a few of the tasks your bookkeeper can handle:
- Recording all financial transactions
- Managing bank feeds
- Reconciling company bank accounts
- Managing payroll
- Handling accounts receivable and accounts payable
- Preparing financial reports and statements
- Assisting with tax preparation
- Using technology, including online accounting software, to streamline tasks and automate aspects of bookkeeping through the linking of bank accounts and credit cards.
Credentials Needed
A bookkeeper usually needs a degree or certificate in accounting, bookkeeping, or a related field. They would also need to complete a board-approved course in GST/BAS taxation principles and pass a certified bookkeeper examination.
Typical Duties and Responsibilities
Typically, your bookkeeper would be responsible for recording daily financial transactions, updating a general ledger, preparing trial balances for the accountants, maintaining and filing requisite documents for tax compliance, monitoring cash flow, producing financial reports to assist managers in making strategic decisions, and depending upon the company, they may also handle payroll and generate invoices.
Advantages of Hiring a Bookkeeper
There are a number of advantages to hiring a professional bookkeeper. They can save you time by handling the financial administration tasks of your company, allowing you to focus on running your business. Your bookkeeper can also be a critical part of the process to make sure all invoices are received and paid promptly, as well as helping you to identify any cash flow issues.
Another benefit is that a bookkeeper can help you stay organized, which is key to making tax time smoother. Plus, if you ever have an audit, your bookkeeper’s work will help you have the right information at your fingertips. When your financials are updated, then it can be simpler to apply for financing from banks or creditors. Good financial records are also key to demonstrating the value of your business to prospective buyers in the future. With all their knowledge of bookkeeping, it will be easier for them to identify possible tax deductions or credits.
Additionally, your bookkeeper can be a budget-friendly addition to your staff, versus hiring an accountant full-time.
What is an Accountant?
An accountant is a professional who performs accounting functions, such as account analysis, auditing, and financial statement analysis. Accountants typically work in companies or in an individual practice. They perform multiple accounting duties, based on where they work. These duties can include the following:
- Account analysis
- Reviewing financial statements
- Conducting routine and annual audits
- Review financial operations
- Prepare tax returns
- Provide risk analysis and forecasting
Accounting duties often depend on the type of educational background and designation they receive.
Credentials Needed
Most accountants have a bachelor’s degree in accounting and have completed examinations. Some of the common designations are the Certified Internal Auditor, Certified Management Accountant, and Certified Public Accountant.
Accountants also must abide by ethical standards and guiding principles of the region where they practice, including the International Financial Reporting Standards or the Generally Accepted Accounting Principles (GAAP).
Typical Duties and Responsibilities
Accountants have a variety of responsibilities and duties based upon where they work and the designations they have. These include the following:
- Complying with all company, local, state, and federal accounting and financial regulations
- Compiling, analyzing, and reporting financial data
- Creating periodic reports
- Maintain accurate financial records
- Performing audits and resolving discrepancies
- Computing taxes
- Assisting management in the decision-making process by preparing budgets and financial forecasts
Advantages of Hiring an Accountant
Hiring an accountant can provide several benefits to small businesses, particularly as trusted advisors who can offer a wide range of business advice. Here are some of the other advantages of hiring an accountant:
- Efficient tax management
- Organized bookkeeping
- Professional guidance on future investments
- Avoid costly mistakes, such as mixing personal and business finances
- Business plan support
- Managing business assets
- Valuing business properties
- Handling complex business software
- Streamlining business growth
- Minimizing business costs
It is important to note that the cost of hiring an accountant can vary depending on the size of your business and the services required.
What are the Differences Between Bookkeeping and Accounting?
There are a variety of tasks and duties that define the differences between bookkeeping and accounting. Here are just a few of those differences:
- Auditing – An audit is an official inspection of business accounts that is performed by accountants only.
- Payroll – Bookkeepers often process payroll, but accountants do not.
- Reports – Companies may use several types of financial reports, but these are usually prepared by bookkeepers.
- Analysis – Accountants may spend more time analyzing reports and explaining how the financial information in them affects the company.
Depending on the size of your company, it may be necessary to hire a bookkeeper and outsource your accounting needs, but as your business grows, then it might be worth considering adding both to your staff.
Required Education
The educational requirements for each position will depend upon the job, whether your business needs a bookkeeper or an accountant. Weighing the current needs of your business is key to determining which required educational requirements are necessary.
Job Outlook
According to the U.S. Bureau of Labor Statistics, the employment of bookkeeping and accounting is projected to decline, but there are still expected to be around 183,900 job openings for bookkeeping, accounting, and auditing clerks each year over the next decade.
Skills Needed
Regardless of whether you are hiring a bookkeeper or accountant, they need to have good attention to detail, management and organization skills, numerical skills, computer skills, and analytical thinking.
Which One Do You Need?
To know whether you need a bookkeeper or accountant, you should do the following:
- Assess your current financial position.
- Compare that to how you want your business to grow financially.
- Consider the scale and complexity of your business, budget, and individual needs.
- Look for signs that it is time to work with an accountant or bookkeeper when it comes to managing your finances.
- Understand the differences between bookkeepers and accountants, such as that an accountant can fulfill the role of a bookkeeper, but a bookkeeper cannot handle the duties of an account without proper certification.
How Can a Bookkeeper Become an Accountant?
A bookkeeper can continue their education and then become an accountant after completing the requisite testing.
The Bottom Line
When it comes to figuring out the right choice for your business, it is important to recognize the current needs and what financial tasks you need to delegate to keep your business on track.
Frequently Asked Questions
Can one person perform both bookkeeping and accounting tasks?
An accountant can perform both bookkeeping and accounting tasks, but a bookkeeper can only perform bookkeeping tasks.
How do bookkeepers and accountants collaborate?
Bookkeepers put together the financial data in reports, making sure that it is accurate and up-to-date, while the accountant analyzes that information and uses it to assist management with long-term financial decisions.
What are the cost differences between hiring a bookkeeper and an accountant?
Bookkeeping services are usually less expensive than accounting services. A bookkeeper will charge you about $35 to $70 per hour, while an accountant will often charge over $100 per hour. Based upon current industry standards, market rates for bookkeepers are $30 to $90/hour, while accountant rates are $150 to $450/hour.
What Is AccountsBalance?
AccountsBalance is a monthly bookkeeping service specialized for agencies & SAAS companies.
We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.
You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.
Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.
And here’s some free resources:
In Summary
When you start your business, you might handle the books, but as the financial administrative workload increases, you might be ready to expand your staff by hiring a bookkeeper or accountant. Determining what is necessary for your business will largely depend upon the budget, and the type of expertise required. With today’s bookkeeping and accounting services, you can also tap into the expertise of both a bookkeeper and an accountant to meet all the needs of your business as it grows.
