Accountants and bookkeepers are essential for helping small business owners manage business finances successfully. But it’s hard to know who to call about what because of how accountants vs. bookkeepers overlap.
Understanding these key differences will save you valuable time, money, and stress. You’ll know exactly which expert to consult about payroll, financial reporting, forecasting, and everything in between. (You’ll also avoid unnecessary expenses if you only need to talk with one of these number crunchers! 💸)
In this article, you’ll learn the difference between accounting and bookkeeping, how certified public accountants and bookkeepers help you, and how to know when it’s time to hire one or the other (or both!).
What’s the difference between accounting and bookkeeping?
Accounting and bookkeeping are essential parts of your business’s financial management. They help you track expenses, process , reconcile bank statements, and file tax returns accurately (what’s up, IRS? 👋). Both functions boost your financial health and longevity.
That’s why it’s important to understand each field’s key differences and unique role in your operations. Sure, you can track financial data yourself for a while, but eventually you’ll scale such that your time is worth more than the cost of outsourcing tasks. Understanding accounting vs. bookkeeping will help you find and hire the right expert.
The role of bookkeeping in a business
Bookkeeping is your business’s record-keeping process. 📕This is where you’ll dot every “i” and cross every “t” to ensure accurate daily financial records. Typical bookkeeping tasks include:
Invoicing your customers
Managing accounts payable and accounts receivable
Recording and organizing daily transactions
Processing payroll
Reconciling bank statements
When bookkeeping, you’ll monitor your general ledger, run financial reports, and track tax deductions. This work lays the solid foundation you need to have a smooth, stress-free tax season.
The role of accounting in a business
If bookkeeping is the building of your financial data library, accounting is the deep dive into the stacks. It's where you draw conclusions, draft plans, and take the next best steps for your business based on the big picture. 📚
Bookkeeping focuses on your business's day-to-day operations, while accounting is comprehensive and oriented toward decision-making. It's the connect-the-dots skillset where you interpret, analyze, and summarize your financial data.
Accounting enables you to make strong financial decisions for your business and plan for the long run. It helps you leverage beneficial tax loopholes (e.g., having your LLC taxed as an S-corporation). It also helps you with strategy-oriented financial planning and reporting, including:
Preparing and analyzing financial statements (such as profit and loss reports, balance sheets, etc.)
Preparing your business plan and budget
What is a bookkeeper vs. an accountant?
The work of bookkeepers and accountants often overlaps, but it’s still distinct. Bookkeepers track every tiny scrap of financial data you need to stay on track and organized. CPAs leverage this data to help you stay on top of tax-related tasks. They safeguard your business's financial health and provide the insights you need to grow.
Bookkeeper qualifications
Your bookkeeper is the steward of your business’s financial filing system. Since they’ll be responsible for tracking every last decimal, you want someone who’s meticulous. Attention to detail should be second nature. (Think Hermione Granger, but finance. ✨) You shouldn’t have to fact check the very person who’s acting as your human encyclopedia!
Who you choose as your bookkeeper depends on your bookkeeping needs. Is your business new? Are you doing most of the bookkeeping yourself and trying to keep costs down while you grow? A high-level bookkeeper can answer your questions and double-check your work for accuracy.
If your business is more established, you'll benefit from increased hands-on support. In this case, you’ll want to look for a bookkeeper who can:
Invoice customers across multiple income streams.
Process payroll for multiple employees.
Understand your industry and business type, such as S-corp or LLC.
Run reports that go beyond a simple Excel spreadsheet.
Navigate accounting platforms like Quickbooks. (Gone are the days of recording purchases in massive paper ledgers! 📜)
Clearly communicate answers to your questions and explain tricky concepts.
Offer the availability you need, whether that's year-round support or tax-season assistance.
Collaborate with accountants. This will ensure they know exactly what to prepare come tax season.
Accountant qualifications
Accounting professionals are the masterminds who keep you on the IRS's good side and guide you through tax filing. They also give financial advice that informs strategic business decisions and usually have an accounting certification. Thoughtful, knowledgeable, and creative problem-solvers are great fits.
Just like with a bookkeeper, who you choose depends on your accounting needs. If your business is still in its early stages, you may only need tax preparation support and general tax advice. But as your business grows, you’ll need to increase your interactions from annual to year-round.
As your business accounting needs increase, look for an accountant who has:
The ability to run in-depth financial reports (profit and loss reports, cash flow management, business financing, etc.). They should be able to confidently identify and advise you on cost-saving opportunities they uncover.
The know-how to streamline your accounting processes. 📊For example, they might automate data entry tasks or know the right software integrations to save you a step or two.
Experience in industries like yours. Request client testimonials to check their track record. (Have they consistently helped small businesses save money and boost financial health? 🤔)
Awareness of tax laws and regulations for your biz. That way you’re prepared for tax planning, stay on the IRS’s good side, and avoid potential fees and penalties.
Strong communication skills with regular availability. When you have a question, you probably don’t want to wait weeks for an answer. Review an accountant’s testimonials or references to see if they communicate promptly.
High comfort level with your preferred accounting software. If you don’t have specific software in mind, ask what your accountant prefers—and why.
The right temperament. Are you a new business owner who is sometimes overwhelmed by the amount of tasks you carry? Someone who’s patient and friendly may be the best fit for you. Alternatively, if you're experienced and move fast, an efficient and direct accountant might be your unicorn. 🦄
When to hire a bookkeeper vs. accountant
Now that you understand the difference between bookkeeping vs accounting and what each professional does, you may be wondering when to hire one (or both!). It all comes down to what you and your business needs.
If your business is new and you're keeping costs down, high-level support is all you need. You can track your daily transactions and financial information while your bookkeeper acts as a support resource. They'll answer questions, check your work, and provide monthly feedback to position you well for tax season. Your accountant will then guide you through tax filing and answer questions as-needed.
Once you're managing full-time equivalents (FTEs) and multiple income streams, it's time to bring on the experts. Delegate financial transaction recording and organizing to a . They’ll keep you on track and record and calculate every detail. Similarly, should conduct a regular financial analysis through reports and utilize more advanced tax strategies so your business can grow. 📈Your accountant will also streamline your company’s financial operations and reporting, saving you time and stress.
💡 Tip: Some accounting firms also offer bookkeeping services. If you want one person to handle both functions, look for this type of professional.
The bottom line
Accounting and bookkeeping help with more than just surviving tax planning. They ensure your business' financial health and set you up for sustainable success.
When you team up with a bookkeeper and accountant, you're not only freeing up time and relieving stress. You're partnering with experts who will help you make confident decisions for your business, every day. 🤝
Ready to start your search? Check out Relay’s to find the best-fit financial professionals near you.
