Accounting Tips

July 7, 2018

Bookkeeping vs. Accounting — What’s The Difference, And Which is Right For Your Business?

Which is right for your business – a bookkeeper, or an accountant? First, you should familiarize yourself with the difference between the two.

Bookkeepers

Bookkeepers are largely the “data entry” technicians of the business. They maintain what we often call the “general ledger,” recording all of the business’s daily transactions such as sales, refunds, and expenses. In some cases the bookkeeper will also process employee payroll and produce invoices for money the company is due.

Accountants

In regards to finances, an accountant focuses more on the “big picture.” An accountant operates at a level above recording daily transactions and maintaining the general ledger – an accountant analyzes all of that information and makes recommendations for the overall financial health of the business.

For example, an accountant will analyze the company’s profits against how much it spends on expenses such as real estate, employee salaries, supplies, banking and credit card fees, advertising, promotions such as sales or coupons, and more. The accountant will often process financial reports and make recommendations for ways to save money on expenses, increase profits and the like. An accountant may also help you file your annual tax return.

Which is Best For Your Company?

In many cases, depending on the size of the business, a business owner may have both a bookkeeper and an accountant. The bookkeeper will continue to maintain the books and record daily transactions, while the accountant focuses on that “big picture” we discussed above.

Many times the two will work in tandem, with the accountant making recommendations to the bookkeeper on the best ways to process financial transactions and record them, and the bookkeeper providing the accountant with the data he or she needs to formulate the business’s overall financial strategy.

As Intuit, the company behind QuickBooks, explains, “The more complex the organization, the more important it is to make sure that the company’s bookkeeper is also supported by a good CPA who can provide advice as and if needed. It’s a great partnership that keeps communication open and data strong.”

What if your business isn’t quite that complex yet, but you recognize that you do need some day-to-day help and expertise for managing your money?

In cases like these, Katie Bunschoten, founder and owner of the bookkeeping and consulting firm KHBOffice, often recommends keeping a bookkeeper on staff to balance the books full-time, and developing a relationship with a CPA that you can come to once a quarter, or as needed.

“Bookkeepers are a great way to manage expenses, but having the periodic support of a CPA ensures that you have more than one set of eyes on the books,” Bunschoten says. “This not only helps to provide more accurate data, but also can act as a deterrent to fraud or theft.”

We at Wendroff & Associates CPA are here to help you run your business as smoothly as possible. If we can help you plan your business’s taxes, or figure out the best way to manage your books, please contact us for a consultation.

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