Choosing Between an Accountant and Bookkeeper
The terms ‘accountant’ and ‘bookkeeper’ are often used interchangeably. There’s a considerable difference between the two, yet some similarities remain. Smaller businesses may have a bookkeeper that fulfills the role of an accountant, and an accountant may fulfill the roles of a bookkeeper. Understanding the differences is not only important in understanding the roles of each, but will also help you understand exactly who you’re hiring.
The bookkeeper fills the very basic role of recording transactions in a chronological order. It’s simple. They review receipts, purchase orders, invoices, and other transactional records, classify them into their proper accounts, and post them to the ledger, whether physical or on which ever digital platform the business uses.
The accountant fills a deeper role for the business. They are responsible for interpreting financial data, and providing feedback to the business unit to help them understand their operations. The accountant may also fill the role of the bookkeeper as well, since the transactional records a bookkeeper manages are part of the overall function for the accountant’s greater purpose.
What we are considering here, are not just similarities between the two, but an overlap of responsibilities. I already mentioned that they both handle the duty of recording financial transactions, but depending on the business, the functions of the two will overlap. Consider these examples:
- For some small businesses, the bookkeeper may fill the role of the accountant by generating reports. This is more common due to sophistications in current software, making it easy to step into the role of the accountant by generating reports w
- Accountants take on a myriad of clients, and for some small businesses, in depth financial reports may not bear an incredible weight in their decision making. Of course understanding how your business is performing is important, but in some situations an accountant simply records financial transactions for a business, and classifies them.
Accountants and bookkeepers are separated not just by their duties they perform, but typically by levels of education. Most software currently is sophisticated enough that businesses may not need an accountant for day to day functions. Tracking cash flows, inventory, and credit are all easy enough to do with readily accessible reports from point of sales systems, your bank, or credit card company. In many cases it is actually possible to simply import these transactions electronically and remove the process of recording these. Of course, receipts, purchase orders, or invoices may need to be recorded manually. An important element of proper accounting, the chart of accounts, can be an infinite number of accounts to which transactions are classified and reported, and which are used to generate financial reports for the business. Sure, the bookkeepers task may appear to be simple, but education is helpful in understanding how to record those financial transactions.
I mentioned that transactions can be automatically imported previously, but what I left out is the classification of these transactions. Consider the difference between assets, liabilities, and owner’s equity. Even with the current sophistications that software has, it can not classify all transactions alone, and still needs human input. While a minimal amount of education, an individual can understand and deduce how to classify transactions in a sensible manner that allows software to continue the rest of the reporting.
The accountant though typically achieves a higher education. A bachelor’s degree is common among accountants, providing reassurance that the individual has the understanding and knowledge to correctly identify some transactions that may need a new account, special treatment due to tax handling, or ensuring the transaction is identified under the correct category. The accountant is considerably more involved in the deeper needs of the business, but may also serve as a reviewer of the work of the bookkeeper to ensure that the basic functions and practices are being applied and understood correctly.
Beyond the accountant though, we do have the Certified Public Accountant, or CPA. The CPA serves as the superior to the accountants. Focusing on the administration of a firm and how it services clients as a cohesive unit.