Accounting VS Bookkeeping

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Accounting VS Bookkeeping

Depending on the size of a company, managing a company’s financial operations may take a staff of one, five, ten or more. In mid-sized to large companies, sometimes an entire accounting department, led by a chief financial officer and or a controller with a team of accountants, is necessary to account for the volume of transactions and manage the financial reporting of an entity’s operations. However, in most small businesses, especially start-up companies and sole proprietorships, a bookkeeper or an accountant may oversee the day-to-day financial operations.

Accountants and bookkeepers play a critical role in any business. While there may be some overlap in their duties, depending on the size of the company, the actual responsibility of each role varies.

What Are Bookkeeping Services?

Bookkeeping is the first step to the overall process of accounting. Bookkeeping is heavily transactional. The core of bookkeeping is data entry and classification of financial transactions. Because bookkeepers are usually the first point of contact for all financial records, it is important bookkeepers understand the nature of the transactions for proper coding to the general ledger accounts. Despite having a smaller focus, a bookkeeper’s role is equally vital to your business since accountants depend on their information to perform their analysis to prepare accurate financial statements.

Typical duties of a bookkeeper include:

Recording and paying vendor invoices
Billing and processing customer payments
Managing petty cash & expense reimbursement
Processing bank deposits
Payroll processing (depending on the company size)

What Are Accounting Services?

Accounting has a much wider purview than bookkeeping. One of the most important functions of an accountant is oversight. Accountants take the information provided by bookkeepers, reconcile and analyze the data and report on the financials of the business. Accounting services often involve planning, budgeting and forecasting. Accountants work closely with the management team to ensure financial statements are prepared timely and accurately. Accountants are usually degreed, skilled and highly paid to manage the overall financial recordkeeping of a business.

Typical duties of an accountant include:

Implementing accounting processes and controls
Account reconciliations
Financial statement preparation
Budgeting and Analysis
Assist with financial statement reviews & audits
Assist with tax return reporting

Which Should You Hire?

Hiring a bookkeeper or an accountant depends on the size of your business, complexity and volume of transactions and company’s resources. Most small businesses, especially sole proprietorships, may hire a skilled bookkeeper to keep the company’s books up to date but hire an accountant or CPA for financial statement review and tax return preparation for year-end reporting. At minimum, all businesses should have a bookkeeper on staff to handle the day-to-day bookkeeping so business owners can allocate their time and focus to other important areas of their business (growing, selling and marketing).

Categories: Accounting