Do You Need a Bookkeeper or an Accountant? Here's How to Decide

Finding the right accounting professional to meet the needs of your small business can be a tricky process. That’s why we’re going to take a look at the similarities and differences between bookkeepers and accountants so that you can make an informed decision on which one is best suited to help you manage your finances.

We’ll cover topics such as the differences between bookkeeping and accounting services, as well as the importance of financial management, budgeting, tax strategy, payroll, and more. By the end of this post, you should have a better understanding of the differences between bookkeepers and accountants so that you can make the best decision for your small business.

What do bookkeepers and accountants do?

Are you a small business owner wondering whether to hire a bookkeeper or an accountant? Or perhaps you need help managing your finances and don't know which professional to turn to? The truth is, there is a difference between bookkeeping and accounting services.

Both professionals can provide valuable financial services, but depending on the size of your business and your financial needs, one may be better suited for you than the other. Let’s take a look at what each professional does and how they can help your small business.

Bookkeepers are responsible for reviewing financial records for accuracy and completeness. They are also responsible for handling the day-to-day financial transactions of a business, such as …

• Recording sales and purchases

• Reconciling bank statements

• Preparing invoices

• Collecting payments from customers

• Helping with payroll processing

• Maintaining records

Bookkeepers usually charge lower hourly rates than accountants, but their services may not be enough for larger businesses that require more comprehensive accounting solutions.

Accountants provide more comprehensive services such as …

• Preparing income tax returns

• Analyzing financial information to identify potential areas of improvement or cost-saving opportunities

• Performing audits

• Offering strategic advice to help businesses grow and succeed

• Creating budgets

• Advising on investments

• Helping manage cash flow

• Developing tax strategies

• Providing second-opinion reviews of existing systems or processes

• Setting up processes that improve efficiency within the company

• Assisting with payroll processing

To determine whether you need a bookkeeper or an accountant for your small business needs, it's important to assess your current situation carefully. If you are looking for assistance with simple day-to-day activities such as data entry, then hiring a bookkeeper could be all that is needed. However, if more complex financial advice is required, then it may be best to seek out the services of an experienced accountant.

Similarities and differences between bookkeepers and accountants

It's important to understand the similarities and differences between bookkeepers and accountants when deciding which one you need.

Bookkeepers and accountants both provide essential services to small businesses, but their roles may be different depending on the scope of work. Let's take a look at some of the key similarities and differences between bookkeepers and accountants so you can better decide which one is right for your business.

Similarities:

• Both help keep financial records accurate and up-to-date.

• Both must follow state and federal regulations when handling financial information.

• Both contribute to the financial management of a business.

• Both work with financial transactions, though at different levels.

• Both may use similar accounting software and tools.

Differences:

• Scope of Work:

  • Bookkeepers focus on daily financial transactions, such as recording invoices, tracking payments, and managing accounts payable/receivable.

  • Accountants handle more complex financial tasks, such as preparing financial statements, budgeting, and tax planning.

• Level of Expertise:

  • Bookkeepers primarily manage data entry and transaction recording.

  • Accountants analyze financial data, provide strategic insights, and ensure compliance with tax laws.

• Decision-Making:

  • Bookkeepers maintain records but do not typically offer financial advice.

  • Accountants provide financial guidance, helping businesses with investments, tax deductions, and financial strategies.

• Reporting and Analysis:

  • Bookkeepers generate reports for tracking daily cash flow.

  • Accountants prepare in-depth financial reports and interpret them to aid business decisions.

• Payroll & Tax Services:

  • Bookkeepers may manage payroll but do not usually handle tax filings.

  • Accountants oversee payroll tax filings, tax returns, and compliance with tax regulations.

• Long-Term vs. Short-Term Focus:

  • Bookkeepers focus on immediate financial recordkeeping.

  • Accountants specialize in long-term financial planning, including business growth strategies and tax efficiency.

• Hiring Considerations:

  • Businesses needing help with daily financial tasks may hire a bookkeeper.

  • Businesses requiring financial analysis, tax preparation, or strategic planning should consult an accountant.

Choosing between a bookkeeper and an accountant depends on the complexity of your business needs. If you need simple transaction tracking, a bookkeeper may suffice, but for financial planning and compliance, an accountant is the better choice.

Do I Need a Bookkeeper or an Accountant?

• Bookkeeper for Basic Financial Tasks

  • Ideal for startups or small businesses with simple accounting needs.

  • Manages accounts payable/receivable and payroll processing.

• Accountant for Advanced Financial Needs

  • Necessary if your business has grown significantly.

  • Provides expertise in legal compliance and tax strategy planning.

• Benefits of Hiring a Financial Professional

  • Ensures financial accuracy and compliance.

  • Provides peace of mind and personalized financial advice.

• Key Considerations When Choosing Between a Bookkeeper and an Accountant

  • Identify financial records needed (for tax vs. legal purposes).

  • Assess the complexity of record-keeping tasks based on business size/type.

  • Compare services, cost, and expertise of each professional.

• Avoid Costly Mistakes

  • Hiring an inexperienced person may lead to financial errors.

  • Proper financial management helps prevent legal or tax issues.

By assessing your business needs carefully, you can choose the right professional to support your financial health effectively.

What credentials do bookkeepers and accountants need?

Bookkeepers and accountants play essential roles in managing financial records, but their qualifications and expertise differ.

Bookkeeper Credentials:

• No formal college degree required, but some have associate’s or bachelor’s degrees in accounting or business.

• Can receive on-the-job training and pursue a professional bookkeeping certificate.

• Often hold certifications from organizations like the American Institute of Professional Bookkeepers (AIPB).

• Some states require licensing before practicing professionally.

Accountant Credentials:

• Typically require a bachelor’s degree in accounting, finance, or a related field.

• Some pursue a Master’s of Accountancy (M.Acc.) degree.

• Certified Public Accountants (CPAs) must pass a certification exam before practicing.

• Must complete continuing education requirements to maintain certification.

Key Considerations for Hiring:

• Bookkeepers handle simpler tasks like record-keeping and financial data management.

• Accountants are needed for complex financial matters such as tax strategy, budgeting, payroll services, and financial decision-making.

• The level of expertise required should guide the decision between hiring a bookkeeper or an accountant.

In a Nutshell

It is important to understand the similarities and differences between bookkeepers and accountants so that you can make an informed decision on which one is best suited to help you manage your finances.

Whether you need assistance with basic data entry or more complex financial advice, both bookkeepers and accountants can provide valuable services. However, depending on the size of your business and your budget, one may be better suited for you than the other.

We hope this blog post has helped give you a better understanding of which type of professional best suits your needs.

If you need accounting services for your small business, we are happy to provide them! Visit our accounting page for more information or call (205) 463-5260.