There will come a time when you will need some outsourced talent to manage your growing business’ finances. Here, you might ask yourself whether you need to hire an accountant or a bookkeeper. Before making a decision, learn about these two jobs before picking which one to recruit for your company.
A successful small business owner understands how to manage their funds. As a result, in order to make sensible business decisions and maintain a healthy cash flow, you need up-to-date and accurate financial information.
Assess your existing financial condition, compare it to your desired financial growth, and decide whether you can manage it on your own. However, when you start adding to your clientele, vendors, and workers, keeping track of your finances gets increasingly difficult.
When your small business’s bookkeeping and accounting tasks grow overwhelming, it’s time to seek help. While the phrases are frequently used interchangeably and their responsibilities overlap, there are significant differences between them. For one, accounting is a subjective assessment of data and how it affects your organization. Meanwhile, a bookkeeper can be an accountant, but not the other way around.
Read on to learn how you can differentiate accountants and bookkeepers.
Accounting is Distinct from Bookkeeping
Bookkeeping is the daily task of keeping track of financial transactions such as purchases, receipts, sales, and payments. Accounting is more subjective because it relies on bookkeeping data to deliver financial insights. Bookkeepers record financial transactions, whereas accountants evaluate and interpret the information.
The Role of a Bookkeeper
Bookkeeping as we know it now dates back to around 2600 B.C. when the trade first began. A bookkeeper’s job is to keep careful records of all financial transactions. Bookkeepers manage accurate, easy-to-read records that aid accountants in their work.
Typical bookkeeping responsibilities include the following:
- Maintaining financial records
- Debits and credits
- Creating invoices
- Profit and loss management
- Keeping ledgers, accounts, and subsidiaries in balance
The primary function of a bookkeeper is to keep a general ledger that tracks revenues and costs. To keep track of entries, debits, and credits, simple ledgers such as a scrap of paper or specialist bookkeeping software such as QuickBooks or Xero can be utilized.
Your company’s sales and purchases must be recorded in the ledger. More information on which transactions require supporting paperwork can be found on the IRS website.
Although no formal schooling is required, a bookkeeper must be knowledgeable with financial terminology and strive for accuracy. A bookkeeper’s job is typically overseen by an accountant or the business owner. A bookkeeper, on the other hand, is not and should not be considered an accountant. They can simply track financial activities, generate invoices, manage payroll, and reconcile the books.
The Role of a Certified Public Accountant (CPA)
An accountant uses the bookkeeper’s financial data to deliver valuable business and financial advice to business owners. Accounting responsibilities include accomplishing these tasks:
- Data should be analyzed and verified.
- Filing and reporting audits such as income tax returns, balance sheets, and income statements.
- Forecasting, analyzing business trends, and identifying development prospects.
- Educating the firm’s owner on the financial implications.
Accounting reports provide a comprehensive view of your company’s finances, what they signify, what you can and should do about them, and where your company is heading in the near future. Moreover, a CPA understands tax regulations better and may represent you if you are audited by the IRS.
Many people think that accountants and bookkeepers are interchangeable. While they share similar tasks, knowledge, and skills, they differ in a couple of ways.
To put it simply, accounting professionals often earn a bachelor’s degree in accounting or finance before pursuing CPA certification. To add, accountants are also sometimes known as bookkeepers. They validate and analyze data, prepare reports, identify patterns, and provide financial advice to business owners.
Bianchi & Associates is a team of accountants in Rochester, NY that offer excellent accounting services. With the experience of over seven decades, we are your credible choice to handle your finances. Work with us today!