As a business owner, do you know the key differences between bookkeepers and accountants? More importantly, do you care? You may not need (or want) to get into the minutiae of how a bookkeeper’s job is different than an accountant’s, but when you need help with your business finances, you’ll want to know.
This will help to make sure that you bring in the right help to solve the specific challenges your business is facing. So if you’ve been thinking about bringing in some financial help, here are the key differences between these professionals.
What Does a Bookkeeper Do?
Many businesses will start with a bookkeeper when the day-to-day management of their books becomes something they can’t handle alone. A bookkeeper’s primary role is to record every transaction in your company’s general ledger. Whether money is coming in or going out, they need to know about it so they can keep your books up-to-date and balanced.
To do this, they’re making credits and debits in the accounts that make up your general ledger. If your business runs on accrual accounting, they’re recognizing revenue and expenses at the right time, which is to say not just when cash changes hands.
(That’s a lot of accounting jargon. If you want some additional explanation, check out our glossary of accounting terms.)
The short version of what a bookkeeper does is data entry. They look at the receipts you hand them, enter the information in the correct way, and keep your books clean. And, for the most part, that’s where their role stops.
Your ultimate guide to SMB accounting
Let’s get those books in order.
Common Bookkeeping Tasks
- Record transactions
- Maintain the general ledger
- Maintain the chart of accounts
- Ensure debits and credits are balanced
- Send and collect invoices
- Make bill payments
What Does an Accountant Do?
Accountants tend to do a lot more than data entry, making their role more complex than your average bookkeeper’s. For the most part, accountants pick up where bookkeepers leave off in the accounting cycle, which is making adjusting entries and developing financial statements.
The preparation of financial statements is the key difference between bookkeepers and accountants. The process of “closing the books” and developing the income statement and balance sheet, the two primary financial statements, can take several weeks.
It’s important to note that financial statements are reports on what happened in the past. They are the most definitive historical record that a business has about how they did and where their business stands financially, but they aren’t forecasts. Accountants may do some financial modeling and forecasting, but most don’t. As we’ll talk about later, that falls more in the realm of other financial professionals.
Accountants do, however, play a large role in business tax filings. Based on financial statements, a tax accountant can help a business know how much to pay in quarterly estimated payments and how to file their annual returns. This is another key difference between accountants and bookkeepers to keep in mind.
What’s the Difference Between a CPA and an Accountant?
It’s true that all Certified Public Accountants (CPA) are accountants. But not all accountants are CPAs.
While most accountants have a formal accounting education, it’s not required to work as one. To claim the title of Certified Public Accountant, however, they would need to:
- Get a degree in accounting.
- Work in public accounting.
- Pass a rigorous test.
The CPA test is notoriously difficult. It’s broken into four separate tests, and the pass rate for making it through all four on the first try is low. It’s only after passing this exam that an accountant can claim to be a Certified Public Accountant.
When it comes to hiring accounting help, bringing in someone with a CPA certification means added credibility. You know that they’ve made it through a difficult process to achieve that title.
So if your books are complex and you need someone to help guide you through accounting, you might look for a CPA. If your books are simple but time-consuming, you could easily open up your search to other accounting professionals.
Common Accounting Tasks
- Making adjusting entries
- Developing financial statements
- Prepare tax returns
- Provide other financials to the company to help make decisions (managerial accounting)
Get Your Free QuickBooks Health Check
Even your books need a second opinion.
TL;DR Accountant vs. Bookkeeper
If everything above was too long to read, here’s the short version of the story.
Bookkeepers primarily do data entry, making sure that your books reflect every penny that’s changed hands over the course of an accounting period.
Accountants use those clean books to make financial statements, which are historical records of your company’s finances.
What About Controllers and CFOs?
If you were hoping that accountants could do more to help you plan for the future and develop detailed forecasts, don’t worry. There are other finance professionals for that.
What Does a Controller Do?
A controller is the next step up after accountants in terms of complexity. For businesses with a few people on their accounting team, a controller may be necessary to oversee all accounting work and do final checks for accuracy. They can play a role in helping owners make strategic decisions, but that’s more often left up to chief financial officers (CFOs).
What Does a CFO Do?
A CFO is the top finance professional in a business. More often than not, they’re CPAs, but they don’t spend their time in the weeds of making financial statements. Instead, CFOs are seen as strategic partners. They oversee the company’s finances and help leadership make decisions about how to spend money, how to budget, and how to plan for the future. A business owner that’s struggling to make heads or tails of their finances may want the help of a CFO.
What is a Fractional CFO?
Fractional CFOs are essentially part-time CFOs. They may work with several companies and will play the role of financial advisor to all of them. They are capable of making complex financial models and forecasts for more than one company, but they don’t cost quite as much as a full-time, in-house CFO. The trade-off, of course, is that you’ll have limited access to their expertise.
The Big Picture: Finance Professionals Side by Side
To sum up: there are many different kinds of finance professionals out there. You might need any number of them to help your business run. What you want to avoid at all costs is bringing in the wrong type of help and having mismatched expectations about what they’ll deliver.
Here’s a quick breakdown of the differences between the professionals we’ve talked about so far. It may serve as a handy reference when interviewing potential help.
|Develop Financial Statements||Sometimes||Yes|
|Create Forecasts & Projections||Sometimes||Yes|
|Help Business Owners Make Decisions||Sometimes||Yes|
How Real-Time Bookkeeping Can Boost Your Business
The results are real.
Can Bookkeeping Services be Replaced by Technology?
In the age of innovation, disruption, and “apps for that” — can technology take the place of these finance professionals? That’s a question many companies (including ScaleFactor) are asking. Here’s what we know.
There are many repetitive aspects of bookkeeping and accounting. When you pay the same company every month for the same software or service, a computer can almost certainly classify that transaction every time it comes up. If you mail a check to a vendor, however, that becomes a lot harder for a computer to figure out. The computer can only go off of the information provided in the bank feed, which isn’t a lot.
So when it comes to bookkeeping services, technology can, in fact, take quite a bit of work off the bookkeeper’s hands.
Beyond day-to-day bookkeeping, though, technology becomes less of a replacement for services and more of a companion to financial professionals. Because accounting follows GAAP, or Generally Accepted Accounting Principles, there are plenty of rules and standards that can be programmed into software. Software like QuickBooks, for example, can spit out financial statements without any human involvement.
But if your company needs a complex depreciation schedule or detailed class tracking, you may need a human brain to help make sure that you’re both following industry best practices and setting up your books in your company’s best interest.
Feeling ready and equipped to bring in the help you need to run your business? Learn how ScaleFactor’s bookkeeping software can help take those bookkeeping tasks off your plate.