Bookkeeper Vs. Accountant, Which One is Right for You?
Many people believe that accounting and bookkeeping are synonymous with one another, but, they’re not. Although both often do similar things and some accountants also act as bookkeepers, the nature of the job itself is different. These two financially-related jobs have a ton of overlap and confusion surrounding it. Therefore, in this article, we aim to clear it up once and for all.
A bookkeeper’s job is to record, keep track of, and sort financial transactions according to the categories and chronological order. Bookkeeping has a lot to do with staying up-to-date with the income and expenses of a company.
The income of a business is anything that is paid to the company, from the interests on their bank account and the sales to the service fees. The expenses include everything that the company pays for: rent, materials, services, and more. Although it may seem like a mundane job, a bookkeeper is still an integral part of any business. Companies go through hundreds if not thousands of transactions every month. If these transactions aren’t recorded and organized, it can be incredibly difficult to keep track of their spending and income, and that will make many other things much more difficult.
For example, if a company doesn’t know exactly how much money they’re making, it can affect their income tax filing, and that may put them at risk for a hefty fine. That’s just one example of why bookkeeping is essential to the success of a business. Bookkeeping used to be done manually, but like everything else in the modern days, the process has been made incredibly simple. There are many automated tools and accounting software that allow you to record every transaction in meticulous detail, and they blur the line between the work of an accountant and a bookkeeper even further.
As discussed, a bookkeeper’s job revolves around collecting and gathering financial information and keeping a record of them. An accountant, on the other hand, focuses more on analyzing and putting the data to use.
They usually do everything from auditing and summarizing financial statements to calculating financial predictions and more. Accounting is more technical than bookkeeping, as you need to understand the many nuances of how finance works and the legal system behind it. We mentioned that bookkeeping is crucial to a business, as they need to keep track of all the transactions and the raw data.
That raw data is what an accountant uses to perform calculations that tell you the revenue and taxes. It also has a role in predicting future financial situations. This is the reason why many accountants are also financial or investment consultants. When an accountant audits your financial statement, they will be able to see every transaction. From that, they can tell you whether it’s a good investment or not depending on the revenue it generates and how much value it has to other domains of your business. Having an accountant with a complete set of financial skills on your side will give your business a massive edge over your competitors.
Do I need an Accountant or a Bookkeeper?
It usually costs a lot less to hire a bookkeeper than an accountant. The nature of a bookkeeper’s job is a lot simpler than that of an accountant, but it’s a lot more tedious. It has a lot to do with punching in numbers into a spreadsheet and performing basic financial calculations.
If you’re not dealing with a huge amount of information and you know how to do more complex financial formulae yourself, then hiring a bookkeeper may be enough. As your business scales up, there will be more numbers you have to deal with, and the calculations and analyses will become more and more difficult. Plus, you will have less time to do all the accounting by yourself. That’s when hiring an accountant may be a good idea.
They can help you manage the financial end of your business and give you advice on your investment decisions. All these elements combined make an accountant one of the most important positions for any company.
Totally Booked offers bookkeeping by QuickBooks Certified ProAdvisors based out of NYC. Get in touch today to see how we can help!