What’s the Difference Between Bookkeeping and Accounting?

Do you need a bookkeeper or an accountant? Both deal with your company’s finances, and while there is a lot of overlap between the two professions, there are also some key differences. If you’re considering hiring an accountant or a bookkeeper, the last thing you want is to neglect an area of your finances because you assumed they would be covered by your bookkeeper or your accountant, only to find out the person you hired only performs some of the tasks you need.

To make sure you’re getting the right financial services for your business, let’s review what services bookkeepers provide and what services accountants provide.

Bookkeepers

Let’s start by taking a look at what bookkeepers do. Bookkeepers are responsible for things like:

• Paying bills;
• Preparing and sending out invoices;
• Processing payroll data;
• Entering financial transactions;
• Categorizing financial transactions (i.e. advertising costs vs. office supplies); and
• Reconciling your financial transactions with your bank statements.

Since the role of a bookkeeper is mostly data entry, it does not require any special skills or a specific degree. If you think the person you hire should have had some higher education, you might be looking for an accountant rather than a bookkeeper.

Accountants

Once you or your bookkeeper has entered all the necessary financial information, an accountant can help you make sense of all that data. Some of the responsibilities of an accountant include:

• Adjusting expense entries not yet entered by the bookkeeper (for example, if you took out a bank loan for your business, your accountant would be responsible for recording and factoring into their calculations the interest on that loan);
• Preparing financial statements of the company, such as an income statement, balance sheet, cash flow statement, etc.; and
• Helping you and/or your management team understand the financial implications of your decisions.

Because accountants are responsible for making sense of your company’s finances and helping you make decisions for your business based on that information, they can be almost like a business partner. Accountants can analyze your financial information for you and help you understand the metrics so you can make better business decisions.

Sub-Categories of Bookkeepers and Accountants

Both bookkeepers and accountants have their specialties. For example, you might find bookkeepers who will do double-entry bookkeeping, but they won’t do virtual bookkeeping, or vice versa.

Since your finances can have a significant impact on all areas of your business, it makes sense for accountants to specialize in each area of your business that can be impacted by your finances. For example, you can find accountants who specialize in financial accounting, management accounting, cost accounting, HR accounting, and responsibility accounting. 

There’s also a hybrid option of companies that offer both bookkeeping and accounting services, and The Bookkeeping Doctor is one such company. We provide bookkeeping services for many of our clients, but our background is in Finance (financial analysis, budgeting, forecast, etc), so we have the knowledge and experience to provide everything from bookkeeping to accounting to CFO-level services. We can also grow with your business, so if you just need bookkeeping services now, but might need accounting or CFO level services later on down the road, we can help.