- Bookkeeping and accounting share many similar functions, but they aren’t identical roles.
- Bookkeeping focuses on recording financial data.
- Accounting is concerned with the interpretation of that data.
- The advantage of having separate roles in the same financial process is the efficiency that comes from specialization.
- SyncLedgers makes it easy to take care of your bookkeeping needs!
When most people hear or read about bookkeeping and accounting, they tend to assume that they’re pretty much the same thing. They’re both about recording business financial data in ledgers and making sure everything balances, right?
Well, not exactly. That instant, microwave-ready definition fits a little better with what bookkeeping is, but it doesn’t tell the whole story, either. Let’s take a closer look at how bookkeeping and accounting each play an indispensable role in every business.
What Bookkeeping Provides
At the fundamental level, bookkeeping has always been about one key task. Bookkeepers are responsible for accurately recording raw financial data in record books called ledgers.
They carefully review all of a company’s necessary financial documents. They categorize them by type and date. Receipts and invoices reflecting both income expenses each require individual attention.
They also prepare some of the same documents they utilize, such as invoices to be sent out to customers and clients. Bookkeepers can also handle tasks such as payroll.
Overall, bookkeepers ensure that financial stakeholders, managers, and fellow employees can rely on accurate, timely, and comprehensive data when it’s time to make business decisions.
This is where their responsibility traditionally ends, though. Bookkeepers do not provide any input on how to make financial decisions. They simply collect and present the data in an organized form.
How Accounting Helps
Accountants, on the other hand, are the ones responsible for analyzing and interpreting that raw data.
Whereas the bookkeeper does all the recording of the data, the accountant has the training and qualifications to say what it actually means for the business.
Accountants take the data and use it to create financial reports. These include profit and loss statements, balance sheets, income statements, and cash flow reports. These reports help stakeholders to see whether and how to make certain decisions that affect the company’s operations and finances.
Company accountants are also responsible for making adjusting entries. With accrual-basis accounting, it’s necessary to close some temporary ledger accounts at the end of each reporting period. Accountants determine how to do this properly, based on the company’s financial situation.
Who Does What
The simple way to put it is this: an accountant can do everything a bookkeeper can, but a bookkeeper can’t do all the things an accountant can do.
Bookkeepers do need to have some knowledge of accounting practices and procedures, but that’s about it. They don’t necessarily require any formal training or higher education to be able to do their job well.
What they do need is an aptitude for numbers and mathematics, patience, attention to details, and a strong sense of diligence. The bookkeeper’s job can be tedious at times.
Accounting can also be tedious, but since it does involve more analysis and critical thinking, there’s no substitute for proper education in this role. An accountant needs to have a university degree in accounting. Becoming a Certified Public Accountant, or CPA, is also essential for tax work.
Why You Need Both Bookkeeping and Accounting
Since bookkeeping and accounting overlap, and an accountant can do everything a bookkeeper would do, what’s the advantage to having a bookkeeper?
It’s simply a question of specialization.
Bookkeepers take care of the most time-consuming parts of tracking business finances. Accountants take care of the parts that require more training.
Many small businesses may find that it’s worthwhile to keep a full-time bookkeeper on staff, to take care of the daily transaction recording. The same may not be said of accountants, who do their most important work on a yearly or quarterly basis. It’s often better to hire an accountant at a specialized firm as needed.
Bookkeeping and Accounting Service Providers
Thanks to modern software advances, many of the functions that traditionally had to be done by accountants are easier to perform. Most bookkeeping programs will now automatically generate many of the quarterly and yearly reports that help with decision-making.
You’ll still need an accountant for weightier matters, especially when it comes to taxes and other legal issues.
Simple bookkeeping is now easier than ever before, though, and SyncLedgers makes it even simpler to hire excellent bookkeepers. We even tailor our service to the financial tracking software you prefer or already use. Contact us today to count on high-quality bookkeeping at a better price than in-house!