Often when I speak to different business owners they are confused about the differences between a bookkeeper and an accountant and how they can work together to help you keep on top of your businesses finances. So I thought as we have just opened our own bookkeeping arm, now would be a good time to shed some light on the differences.
Accountants help keep your finances in order but bookkeepers play an important role too. So what’s the difference between a bookkeeper and an accountant? And how can a bookkeeper help you run your business?
If you’re a small business owner, you’ll be familiar with juggling several tasks at once. As well as keeping things running, you need to generate income, keep your customers happy and look after financial information. Tracking the financials can be a chore though, and one of the biggest questions you might have is who you get to help with your accounts. Do you need an accountant, a bookkeeper or both? Let’s demystify things.
Accountants and bookkeepers have different jobs and responsibilities. An accountant’s main focus is:
- the preparation and lodgment of statutory returns
- advising on legal entity structures
- giving general business and financial advice.
Accountants are usually members of a statutory association. Qualified and registered accountants might call themselves CPAs (Certified Public Accountants), CAs (Chartered Accountants) or other titles, depending on the country they’re working in.
Bookkeepers can manage lots of different responsibilities within a small business. But the main focus is the organization, recording and reporting of financial transactions as part of the operational life of a small business. In more recent times, some bookkeepers have extended their range of duties to include:
- training clients to use accounting software
- implementation of document management and inventory control processes to create efficiencies within the business
- implementation of POS (point of sale) systems that capture the daily transactions in a retail environment.
- Develop, implement maintain and review internal business processes.
You will often find that a bookkeeper has an area of specialization and it’s a great idea to ask them more about this when you are looking at hiring them for services.
What do bookkeepers do?
Here are some of the tasks of bookkeeper that will help to keep your business running smoothly:
- Keeping track of daily transactions
A bookkeeper can handle the recording of day-to-day bank transactions. If the accounting software you use has daily automatic bank feeds, this is a great tool for your bookkeeper to use. When your bank statement lines are fed into your accounting software, it’s much easier to keep an eye on cashflow and it also saves on data entry time.
- Sending out invoices and managing the accounts receivable ledger
Preparing invoices and sending them to clients is usually the bookkeeper’s responsibility. Managing the accounts receivable ledger – and chasing late payment– is also likely to be done by a bookkeeper.
- Handling the accounts payable ledger
Up to a certain dollar amount, it’s usually bookkeepers who will make payments on behalf of the business. This includes payment of supplier invoices, expenses and petty cash.
- Keeping an eye on cashflow
One of the most important tasks for a bookkeeper is making sure the company doesn’t run out of day-to-day money. They can do this by watching the balance of revenues to expenses. Then they can take action or offer advice if it looks like the company needs more ready cash.
- Preparing the books for the accountant
It’s the bookkeeper’s job to ensure that the accounts are valid and up to date when the accountant needs them. This allows the accountant to use their skills and knowledge to make business recommendations, report to the board and complete company tax returns.
In summary, it’s the bookkeeper who does the day-to-day work so that the accountant can concentrate on strategic financial operations. So bookkeepers play an important role – without them, accountants can’t do their jobs.