Bookkeeper or accountant: Which is right for your small business?

As a small business owner or CEO, you’ve got a lot on your plate. And handling the financial side of your company is just one more task on your never-ending to-do list. 

If you’re feeling overwhelmed by your bookkeeping and accounting activities, or realize these critical tasks have been largely ignored in your company, it’s time to consider bringing in a finance professional to streamline your operations and get your finances back on track. 

So which does your small business need: an accountant or a bookkeeper? Keep reading to understand the difference between the two professionals, and which (if not both!) may be right for your business.

Bookkeepers master the day-to-day income and expenses

When you hire a bookkeeper, they’ll handle your daily financial transactions — monitoring, categorizing and adding them to the right sections of your financial reporting software. While they won’t typically prepare your monthly financial statements, they can tell you exactly what expenses happened when, or the balance of every account in the ledger. 

Your bookkeeper will handle:

• Reconciling your bank accounts. They’ll compare the transactions in your business’s records with those reported by the bank to confirm accuracy and identify any discrepancies. 

• Maintaining financial records. Bookkeepers are responsible for keeping accurate, up-to-date ledgers of all expenses, income and assets associated with your business.

• Processing payroll information. This involves calculating payroll taxes owed, preparing paychecks, and issuing payments. (Considering the average business owner spends about five hours per pay period on these tasks, this alone is a huge timesaver!)

• Generating invoices and tracking receivables. Bookkeepers generate customer invoices, help manage collections, send out past due notices as necessary, and update the matching accounting entries once paid in full.

In summary, a bookkeeper essentially records and categorizes all daily expenses, business activities, payroll, and invoices, then gives this financial information to an accountant (or the business owner) for advanced reporting and confirmation. 

While a bookkeeper isn’t required to have a specific educational background or certification, they’re extremely accurate in their work and have lengthy knowledge regarding financial topics. Their ability to handle the tedious, time-consuming tasks that take you hours to complete on your own each week makes this professional a valuable member of every small business’ team. 

Accountants offer advanced services, greater reporting and stronger expertise

An accountant uses financial data to produce financial models, can offer valuable tax advice and preparation services, and can aid in financial decisions and planning. 

Accountants have a wider understanding of how income and expenses can impact the health of your business. They’re familiar with tax laws and can prepare your reports in compliance with regulatory requirements. 

And because of their deep knowledge and integrated experience, they can be an important person to have in the room when making significant business or financial decisions. 

Accountants are typically trained to handle these activities:

• Preparing financial statements, such as balance sheets and income statements.
• Reconciling bank accounts to ensure accuracy of transactions.
• Producing reports for budgeting and forecasting purposes. 
• Monitoring cash flow to make sure adequate funds are available for current operations.
• Filing all necessary tax returns in a timely manner, like payroll taxes and sales taxes.
• Investigating discrepancies between actual results and expected outcomes or budgeted amounts.
• Developing internal controls procedures that protect company assets from fraud or theft.
• Analyzing business costs associated with products manufactured and sold by your business.
• Providing advice on strategies designed to increase profits or reduce expenses.

Many accountants are also certified public accountants. This advanced licensure gives these experts the credentials they need to file taxes, certify financial statements, design accounting systems, perform audits, and formulate business plans. 

While the requirements to become a licensed CPA vary among states, all require a bachelor’s degree with at least 150 credit hours of accounting-specific coursework, in addition to passing the Uniform Certified Public Accountant Examination. For that reason, CPAs are the most knowledgeable financial professionals you can work with. 

Which professional is right for your small business?

An estimated 64% of business owners handle their own bookkeeping, but 60% of owners say they aren’t knowledgeable when it comes to accounting! If you’re in that large majority of owners who do your financial work yourself, and don’t feel prepared to handle these critical tasks, it might be time to hire a bookkeeper, an accountant, or both. 

A bookkeeper typically performs tasks such as managing accounts payable, payroll and tax filing, while an accountant usually provides more strategic advice related to expenses, income forecasting, and financial projections, the best professional for you depends on what level of service you need. 

For basic accounting help, like recording expenses and paying your employees, a part-time or outsourced bookkeeper can save you hours every week— and is often very affordable. 

For tax support, deeper financial analysis, and statement preparation, consider hiring an accountant. This professional can also be a part-time addition to your team, if you only need occasional support or have a small team. 

If your company has more than a few employees and significant annual revenue, you’ll likely benefit from having both a bookkeeper and an accountant on staff. The two professionals will work together to handle both the day-to-day financial administrative tasks, as well as your financial statement preparation and tax requirements — saving you considerable time and headaches, while reducing the likelihood of costly financial errors. 

Want more? In addition to taxes, accounting, bookkeeping and CFO services through its FinOps, Escalon’s Essential Business Services include PeopleOps (HR, benefits, recruiting and payroll) and Risk (business insurance). Talk to an expert today.