Bookkeepers and Accountants: The Differences

Different specialisations available in the field of finance means different finance professionals bring different skill sets to the table. This gives rise to varying degrees in rank, expertise and service fees. Start-ups have to choose the right skill set for the job at each point in time. Business owners should consider team composition to be flexible. It is normal for the business team to change, evolve, and grow as the business itself does. Yet in the face of change some things will stay the same. The accounting function will always be required.

Bookkeeping, often called record keeping, is that branch of accounting that records transactions and business events in the accounting system. This accounting system can be manual as in paper records or electronic as in an accounting program like Quickbooks, Xero, etc.

Bookkeepers generally have a good understanding of GAAP and are responsible for dealing with a company’s daily financial details. Accountants rely on the meticulous records maintained by bookkeepers. This means bookkeeping is the foundation of accounting. Bookkeepers often have to exercise judgment calls and analytical skills when recording transactions since they are the major source of accounting information in the business.

Accountants use their knowledge to establish the procedures a company needs to follow for accurate financial record keeping. Once the needed information has been collected (by bookkeepers), they analyse it to provide valuable business information. The accountant can reveal the business’ strengths and weaknesses, create strategies for improvement, identify or prevent fraud, plan wisely for tax season, and prepare for future growth.

Large companies will employ both. Smaller businesses will usually have bookkeepers for reasons of cost and complexity of transactions. Accountants are more expensive to retain full time and small businesses do not normally have very complex transactions. Since bookkeepers are all about the details while accountants focus on the big picture, the smart move for small businesses is to retain a bookkeeper and have accountants consult on bigger issues like business growth and improvement strategies.

It is the trend for the books be done by a small business bookkeeping service. Small business find that outsourcing helps them reduce cost while leveraging expertise they may not have access to based on how much they can afford to pay a staff bookkeeper.