Bookkeeping and Accounting are commonly mistaken for one another. Although similar in nature, some key differences set them apart. Here, we will discuss the different tasks between Bookkeepers and Accountants.
The role of Bookkeeping and Accounting is commonly misunderstood. They both share a common goal: finance. Their tasks may overlap in some areas (depending on your company or financial software.) The key difference is that a Bookkeeper’s role is to keep financial transactions and Accountants analyze the data input by bookkeepers to help business owners in forecasting and giving financial advice. This is a general and simple definition. In this article, we will discuss the key differences between Bookkeeping and Accounting in greater detail.
Bookkeeping
Generally speaking, a Bookkeeper makes far less income than an Accountant. Bookkeepers need less education (an associate’s degree is required) and usually cap out at about $20,000-$30,000/year. This is not to downplay the role of a Bookkeeper by any means. This is to give business owners an idea of what to expect. As stated before, a bookkeeper’s key role is to keep and record financial transactions. Here is a general list of Bookkeeping tasks:
- Recording and maintaining financial transactions. Such as processing invoices, recording receipts, payments, and other transactions. This is commonly known as the General Ledger.
- Maintaining the payroll system.
- Preparing financial statements (getting it ready for the Accountant).
- Managing accounts receivable and accounts payable (who owes you and what you owe).
- Creating and Maintaining Financial Systems.
*Note- this is one of those tasks that can be either/or. Nowadays, there is fantastic software such as QuickBooks that serves as a home for all your financial recordings. However, if these systems are not set up, this can cause severe problems down the road. This is one of those cases where you will want to have someone with extensive knowledge of the program and have set them up before.
Accounting
As stated before, an Accountant’s general role is to analyze financial data, past and present, and aid business owners in financial decision-making. The Bookkeeper’s role is to keep that data. An Accountant’s qualifications need at least a bachelor’s degree, and salaries generally start at $60,000/year. Notice that I said ‘start’ rather than ‘cap’ like I did Bookkeepers. This is because Accountants qualify for an array of certifications that can boost that number, such as a CPA certification. Here is a list of general Accounting tasks:
- Analyzes financial data and creates a business plan based on that data.
- Taxes
- Accountants are trained on the U.S. Tax Code. They can not only do your taxes but also make sure you get all of the deductions and rebates your company qualifies to keep costs low.
- Corporate reporting and compliance.
- Financial management advice.
- Finalizes and edits financial statements. (Balance Sheet, P&L Statement, Cash Flow)
As you can see, the Accountant and Bookkeeper have different roles. However, both are important when it comes to running your business smoothly and efficiently. If you’re looking into hiring a Bookkeeper or Accountant, one of the best ways is through word of mouth. If you are a new business owner, we recommend moving quickly because both professions are in high demand.
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