The terms accountant and bookkeeper are often used interchangeably. While there are some similarities in what they do, they are more different than you may know.
As your business grows, managing your finances can get more challenging, which means you will need to bring someone on to help. But the question is, do you need an accountant, a bookkeeper or both?
What is bookkeeping?
Bookkeeping is an administrative position that manages day-to-day financial responsibilities. These responsibilities generally include:
- Recording financial transactions
- Generating invoices and recording payments
- Making bank deposits
- Paying bills on time
- Managing payroll
- Balancing ledgers and accounts
- Remitting business taxes, such as GST/HST and payroll taxes
- Completing monthly reconciliations
Simply put, a bookkeeper maintains accurate records of all the money that flows in and out of your company.
What is accounting?
While accountants can provide the same service as a bookkeeper, their primary responsibility is providing owners with insights about their finances using bookkeeping data.
The responsibilities of an accountant also include:
- Confirming and analyzing data
- Performing audits and reviews
- Preparing financial reports, such as income statements and balance sheets
- Providing recommendations on how to optimize your after-tax position
- Forecasting
- Providing advice to help with decision making
- Making adjusting entries
- Preparing and filing tax returns
Bookkeeper vs accountant
There are a number of ways that bookkeepers and accountants differ. Here are three big ones:
- Certification
Bookkeepers don’t have formal educational requirements, though there are post-secondary courses that can help prepare bookkeepers. In addition, bookkeepers do not have to be certified.
Accountants, on the other hand, must generally complete a four-year university course, followed by several years of training and on- the- job experience to obtain their accreditation as a CPA (Certified Professional Accountant).
- Cost
Bookkeepers tend to charge a lesser rate for maintaining your books. However, the amount will differ depending on the services your business needs and the amount of time it takes your bookkeeper to complete those tasks. For example, having someone come in to reconcile your books at the end of the month will be substantially less costly than having someone manage the day-to-day operations on a full-time basis.
Due to the education and expertise of an accountant, their fees are generally higher. Like a bookkeeper, however, the hourly rate will depend on the type of work they are doing and how much time it takes.
- Expertise
Because there is no required education or certification, bookkeepers have a range of experience and knowledge. If you have more complex books or many transactions, you’ll need a bookkeeper with more experience.
Because their training and education is more formalized, there will be more consistency in the information and work provided by accountants. They will also be able to bring you more expertise, especially as it relates to taxes, investment and growing your business.
That being said, expertise, skill and knowledge can still vary between accountants, so you want to be sure to vet the professionals you work with to ensure they are a good match for your business and needs.
So, do you need a bookkeeper or an accountant?
As your business grows, you will likely want to have both a bookkeeper and accountant. If you hire a bookkeeper either internally or through an external service, you will need to find a separate accountant. However, you also have the option of hiring an accountant that offers bookkeeping services. Alternatively, you could maintain your own books and then hire just an accountant.
The one similarity between all these options is that you should always have an accountant. That’s because your accountant will help prepare important financial statements and complete your year end taxes, which is a complicated task that bookkeepers are not equipped nor trained to complete. In addition, they will be able to provide you insights and advice on optimizing your after-tax position, professional and personally, and growing your business so that you can maximize your success.
For more information on why hiring an accountant is critical to your businesses success, contact us today.
