Every business owner should know that although accounting and bookkeeping accounting are both important business functions, there are differences. Both accountants and bookkeepers support your business in different ways as your business evolves. Here are details to consider when working with one, both or if you choose the DIY method.
Bookkeeping sets up the foundation for accountants, tracking your finances by recording transactions. This gives you a holistic view of your business so you can easily see the amount of money coming into and leaving your business. Bookkeepers are tax compliant so you can avoid penalties and fees from the IRS
Here are six common bookkeeping tasks:
Here are four accountant responsibilities. They use the financial data to offer detailed insights and guide smart business decisions.
Bookkeepers aren’t required to have specific education but should be very accurate and familiar with key financial topics. If you’re hiring a bookkeeper, it’s a good idea to hire one familiar with small business operations.
Generally, if you want to practice as an accountant, you must have a bachelor’s degree in accounting or another finance degree. Accountants can be awarded additional professional certifications like Certified Public Accountant (CPA). Learn more here from the Crush the CPA Exam blog: Top 5 Best Accounting Certifications.
Accountants are qualified to handle the entire business accounting process, while bookkeepers handle recording financial transactions. For accuracy, accountants often advise bookkeepers and review their work. Bookkeepers take care of financial transactions so accountants can analyze the data.
Because they both work in the financial space, bookkeepers and accountants share some similarities.
Small entrepreneurs may be able to outsource accounting or bookkeeping services for quite some time -- or until it has about 30 employees. Until then, most businesses usually don't have enough work to keep a full-timer busy every day.
It's time to hire full-time help, though, when you're calling your accountant often enough that you wish he or she were in the office all the time. Bring in a full-time bookkeeper when your part-timer is spending two or three full days in the office and still falling behind.
Keep in mind that a bookkeeper compiles the financial data and the accountant makes sense of it and can provide business operation recommendations. An accountant for your small business is also very helpful when you need help with the collection, analysis, and reporting of financial information.
If you’re spending valuable time on bookkeeping or numbers aren’t your strong suit, consider bringing a bookkeeper on staff or hire an outside consultant.
Here are accounting programs to help you organize your finances. If you bring on a professional, they may use one of these as well.
Shoebox accounting (tossing everything together and sorting it out later) can cripple your company. These days, small businesses need an accounting system that’s cost effective, up-to-date and can handle all financial tasks you need to run your company. If you’re not happy with your current system or need to establish one, consider one of these free accounting software systems: