Bookkeepers and accountants both share the goal of helping your business thrive financially. But their roles are distinct. Bookkeepers focus more on day-to-day responsibilities. Those include recording transactions, reconciling accounts and managing invoices. Accountants provide overarching financial advice and tax guidance.
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Bookkeeper vs. accountant comparison
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What does a bookkeeper do?
Responsibilities
Small-business bookkeeping involves keeping accurate records of all financial activity. To do this, bookkeepers usually participate in a business’s daily operations. Some of their tasks include the following:
- Recording transactions. You should record all business transactions in your accounting software. That transaction could be a sale, purchase or bill, among other things.
- Maintaining the chart of accounts. Bookkeepers generally set up a company’s chart of accounts. This involves making sure there aren’t too many or too few accounts. If you set up the chart of accounts incorrectly, small mistakes can snowball into larger issues.
- Reconciling bank statements. This task usually happens on a monthly basis. It ensures that recorded transactions match what’s in that month’s bank statement.
- Preparing important financial reports. These include the profit and loss statement, balance sheet and statement of cash flows.
- Handling accounts receivable and accounts payable. Managing accounts receivable could mean sending out invoices, establishing terms of payment, ensuring customers pay on time and tracking down overdue payments. Handling accounts payable entails making sure vendors get paid.
- Managing payroll. Bookkeepers may read time sheets, calculate deductions and process payroll.
» MORE: What is bookkeeping?
Qualifications
Expert bookkeepers often have professional credentials. Keep an eye out for certifications from the National Association of Certified Public Bookkeepers or the American Institute of Professional Bookkeepers in particular. Those bookkeepers will have CPB or CB after their names.
However, know that these certifications are optional. People don’t absolutely need one to be a professional bookkeeper.
Resources
What does an accountant do?
Responsibilities
While a bookkeeper’s job is very detail driven, accountants generally adopt a broader perspective. Here are some of their tasks:
- Preparing and filing tax returns. Working with an accountant helps ensure you're filling out tax returns correctly. This minimizes your tax liability and the chances of the IRS auditing you. Accountants can also help you take advantage of business tax deductions.
- Giving financial planning advice. Accountants can help you choose the best business structure. And they often act as trusted advisors going forward. It might even be worth getting them involved before you’ve finished writing your business plan. That way, they can provide financial forecasts and financial planning tips.
- Helping you apply for business loans. Sometimes lenders ask complicated questions about your business's performance. This is where accountants come in. They may also advise you on small-business loans and their interest rates, terms and conditions.
Qualifications
If you want someone with a higher level of mastery in accounting, consider hiring a certified public accountant. CPAs are accountants who have completed a higher level of education and have passed the CPA exam. CPAs also need to keep their certification current, so they’re often up to date on important tax law changes.
However, people don’t need CPA licensing to be an accountant. Some accountants have a bachelor’s degree in accounting but no CPA certification.
Resources
Do you need both a bookkeeper and an accountant?
At the very least, all small-business owners should consider hiring an accountant to handle their tax returns.
However, when it comes to bookkeeping, some entrepreneurs manage those tasks themselves. Software like QuickBooks Online, FreshBooks and Xero can automate a lot of this work. But as your business expands, you might hire a bookkeeper to free up some of your time.
» Need someone to help with long-term financial strategy? Consider a fractional CFO.
