If you’ve ever thought to yourself what does a bookkeeper do and how are they different from an accountant I can assure you, you aren’t alone. It can be confusing to understand how they differ since Bookkeepers and Accountants have similar skill sets and often their work overlaps.
To start let’s dive into the difference between bookkeeping and accounting.
What is Bookkeeping?
Bookkeeping is the record keeping part of the accounting process where all the financial records of a business, including day to day transactions are handled. It involves the tracking of cash flow into and out of a businesses from invoices to payroll. It’s a critical process for both the business owner and people who interact with the business.
Bookkeeper Responsibilities
- Record and classify daily transactions
- Handle accounts payable and receivable
- Maintain accurate financial records
- Generate financial reports such as Profit & Loss, Income Statement and Balance Sheet
- Manage company payroll
What is Accounting?
Accounting is the process of recording, summarizing, analyzing and reporting a companies financial transactions and activities. The goal is to provide a clear picture of a businesses financial performance for owners and stakeholders. It’s typically performed by a CPA (certified public accountant) to help ensure long term success by providing insight and guidance on a business’s financial decisions.
Accountant Responsibilities
- Review data and financial statements
- Provide strategic financial advice
- Handle tax planning and preparation, including filing taxes
- Create financial forecasts
- Conduct audits and ensure business are compliant
While at times Accountants do some bookkeeping activities for clients, Bookkeepers have a different role. They do not handle any analyzing of financial reports. They also do not file taxes unless they are a certified tax preparer.
Think of Bookkeepers almost as the nurses of the finance world and accountants the Doctors. Bookkeepers collect and organize data (or daily financial transactions) they use to create reports. Accountants then read and use the reports to help guide Business Owners in financial decisions.
Ultimately Bookkeepers help keep your business financial transactions organized. This is essential to your businesses success and when ignored or avoided can lead unnecessary stress and extra work come the end of the year.