(disclaimer: this is not legal advice consult with a licensed professional)
When it comes to bookkeeping and accounting, most people cannot easily differentiate the two. Despite sharing similar goals, bookkeepers and accountants complete different tasks within the financial reporting function.
Both sets of experts are critical in developing effective controls and properly tracking business growth. Finding a qualified accountant is often easier than finding the right bookkeeper. However, bookkeeping with SynkBooks makes the decision simple with their team of experts ready to tackle your bookkeeping needs.
Understanding the tasks, education, experience, and fee differences between a bookkeeper and accountant will be critical when deciding which one is right for your small business.
What is the Difference Between Bookkeeping and Accounting?
When analyzing the difference between accounting and bookkeeping, there are a few discerning factors:
- Bookkeeping entails administrative procedures while accounting involves subjectively analyzing financial and tax situations. Bookkeeping procedures may be used for managers to make decisions on day-to-day operations.
- Accounting tasks are utilized for high-level decisions by business owners and investors.
Both sets of procedures are essential for business growth and success within your organization.
According to the U.S. Bureau of Labor Statistics, there were 1,620,000 bookkeeping jobs in 2020 in the United States and only 1,392,200 accounting jobs. Technological advancements have helped outsourced bookkeeping take off, providing new career opportunities for individuals and added flexibility for small businesses.
What Tasks Does a Bookkeeper Complete?
Bookkeepers are involved in the day-to-day operations of a business. This includes managing the accounts receivable and accounts payable departments. Payments from customers need to be recorded daily to improve cash flow, while invoices from suppliers should be entered into the accounting system timely.
In addition, bookkeepers will deal with any financial situation that arises throughout the day, such as billing questions from customers and vendors. Daily procedures are critical to keeping your accounting ledgers accurate, leading to more informed business decisions.
Small businesses often have a bookkeeping checklist to ensure monthly procedures are being properly completed. Monthly procedures entail completing reconciliations for all bank and credit card accounts, generating financial reports, submitting sales tax forms, and analyzing areas of concern.
Depending on the pay schedule of your business, monthly procedures may also include payroll processing weekly, semi-weekly, or monthly. Additionally, regulatory agencies require monthly payroll remittances for federal, state, and local taxes, adding to the monthly procedures.
On an annual basis, bookkeepers prepare all year-end payroll tax forms, including W-2s, 1099s, the 940, and 941. Furthermore, bookkeepers review general ledger accounts for any obvious errors in preparation for the accountants who create financial statements and file tax returns.
What Education and Experience Does a Bookkeeper Need?
Bookkeepers aren’t required to hold a degree to complete the necessary tasks; however, businesses generally do appreciate a degree related to accounting. Some bookkeepers retain an associate or bachelor’s degree in accounting from an accredited institution.
One common educational path for a bookkeeper is licensing through the American Institute of Professional Bookkeepers. This path requires 2 years of experience and the passing of a national exam. This can be a great career path for someone who isn’t looking to obtain a college degree.
Certain businesses value experience over education. Most bookkeeping tasks remain the same regardless of the industry or business worked in. Having first-hand experience completing daily, monthly, and yearly procedures can take the new hire training burden off business owners.
Searching for a candidate with a strong work ethic, the willingness to learn new tasks, and an enthusiastic outlook often rank higher compared to the education they retain. Take a look at the needs of your business before interviewing potential bookkeepers.
What Does a Bookkeeper Charge?
Bookkeepers charge based on the level of service, their experience, and current market demands. The need for bookkeepers has increased over the past few years with a nationwide shortage. As a result, the national average charge rate is between $29 and $43 per hour. This goes up if you hire freelancers.
Due to the cost of hiring an in-house bookkeeper, many small businesses have been transitioning to a virtual bookkeeper, like SynkBooks. Added flexibility, customized service packages, and reduced costs are just a few of the benefits small business owners realize when they make the switch.
What are the Advantages of a Bookkeeper?
All businesses need a bookkeeper to run the day-to-day processes, whether that person is you, an in-house employee, or an outsourced bookkeeping firm. Regular bookkeeping procedures give your business access to real-time reports that can improve cash flow management.
When there are greater controls in your bookkeeping function, your business will see heightened growth, reduced errors, and added security as you scale growth. Bookkeepers generally have lower costs compared to accountants, making them a wise choice for small businesses.
What Tasks Does an Accountant Complete?
One main difference between bookkeeping and accounting is the monthly procedures they complete. Accountants aren’t concerned with the day-to-day processing tasks or even the monthly reconciliations. Instead, they focus on effectively utilizing the reports generated by bookkeepers.
Monthly procedures for an accountant include analyzing financial statements, reviewing budgets, updating tax plans, finding creative tax strategies, tracking business performance, and advising owners and investors.
A majority of the work burden for accountants appears at year-end. This is when your business may have financial statements professionally drafted through preparation, compilation, review, or audit procedures, most of which require a licensed accountant.
In addition to issuing yearly financials, accountants will prepare and file your business and personal tax returns, depending on how the income is taxed. The IRS requires all tax return preparers to maintain a PTIN, which a bookkeeper generally doesn’t have.
What Education and Experience Does an Accountant Need?
Accountants need to have some formal education through an accredited school. The most common degree is a bachelor’s degree in an accounting, finance, or another business-related field. However, some intro-level accountants may only require a 2-year associate's degree.
A primary difference between accounting and bookkeeping is that accountants have the ability to become licensed by the state through a Certified Public Accountant license. This license requires a bachelor’s degree in accounting along with passing 4 national exams.
Many business owners seek out an accountant with a CPA license because they are held to greater standards and industry requirements. Moreover, CPAs can issue reviewed and audited financial statements, which may be required by your lenders.
The experience of an accountant is not as important as the experience of a bookkeeper since accounting firms are generally composed of a team of multiple experienced practitioners. However, you do want to be sure that your accountant has worked with other clients in your industry.
Most accountants have a list of their preferred industries on their about page or you can simply reach out to prospective firms to discuss further. You should be interviewing different accountants before you begin working with them.
What Does an Accountant Charge?
Similar to bookkeepers, the demand for accountants has steadily increased in the past few years, giving them the ability to charge higher rates. Accountants usually charge by the hour with an average rate of $125 - $250 per hour depending on the experience level.
Hours charged by an associate will remain on the lower end while hours charged by a manager or shareholder will be higher. Furthermore, an accountant with a CPA license will charge higher fees because they have expanded knowledge and experience.
What are the Advantages of an Accountant?
An accountant can provide your business with added financial insight and tax filing abilities. Mandatory filings by regulatory agencies should be completed by a qualified accountant, reducing any errors.
The analysis, expertise, and legal assistance an accountant gives your business is important to stay in compliance with governing bodies and effectively minimize your tax burden.
Can a Bookkeeper Be an Accountant?
Simply put, yes. Accountants often serve as bookkeepers for their clients, assisting with monthly reconciliation procedures. However, the fees for having your accountant as your bookkeeper can be higher compared to a bookkeeping company.
Should My Business Consider an Accountant or Bookkeeper?
All growing businesses should retain both a bookkeeper and accountant. A bookkeeper handles the administrative side of your business’s finances while an accountant takes care of financial and tax filing requirements set out by the IRS.
Account maintenance throughout the year relies on bookkeeping while year-end procedures involve the help of an accountant. Depending on where your business stands, you may benefit from building a relationship with a bookkeeper before an accountant.
Keep Your Financials in Check!
Avoiding any confusion on the difference between accounting and bookkeeping is the first step to getting your business’s finances in check. Finding a qualified bookkeeper is a tedious process with new businesses and candidates popping up every day.
SynkBooks understands that getting your financials in check is no easy task, which is why their carefully crafted team of experts work relentlessly to meet your needs and find strategies that work for you.
Not only will you see greater financial success with SynkBooks working by your side, but you can also take advantage of reduced fraud risks, timely reports, and low costs. Reach out to a team member today to get started!