Updated September 13, 2022
Whether you’re in the business of selling a commodity, providing a service, or giving people a world class experience, you likely know your business well. You meet or surpass your competitors, you understand your target market, and you work tirelessly to grow your company. But no matter how well you know the product you sell, you cannot truly understand your business unless you know your numbers.
To have clarity when it comes to your company’s finances, it is important to have a clear accounting strategy in place. Depending on your finance and accounting knowledge, you may need a bookkeeper or an accountant for your company. So what’s the difference between bookkeepers and accountants, anyway? Credibly explains which of them you should hire, and when
Why You Need a Bookkeeper?
Although the roles of bookkeepers and accountants often seem to be separated with a blurred line, the two differ regarding specifics of their duties as well as their background and education. Bookkeepers are generally required to have basic financial knowledge, and their main responsibilities include processing payroll, creating invoices, recording debits and credits, tracking financial transactions, and balancing and maintaining an accurate general ledger (which can be done by hand in a notebook, on a computer spreadsheet, or using special software). Bookkeepers need to work with accuracy and efficiency.
When Do You Need an Accountant?
Accountants, on the other hand, are typically required to have a degree in accounting or an equatable financial degree. To claim a special certification like a certified public accountant (CPA), the accountant is required to have particular experience, further education, and to have passed a series of special examinations.
Think of accounting as bookkeeping on a more advanced level. An accountant uses the information compiled and recorded by the bookkeeper to file taxes and produce financial statements such as the balance sheet (accounts receivable vs. accounts payable), profit and loss statement (revenue vs. expenses), and a cash flow statement. An accountant then uses the information from these financial statements to generate important key performance indicators (KPIs) to measure the business’s financial success.
Some KPIs include cost per invoice, on-time payment rate, invoices per full-time employee, days payable outstanding, cost per square foot, customer acquisition cost, and more. With this information, a business owner can glean much knowledge about the company’s performance and future.
The Difference Between Bookkeepers and Accountants
A business owner generally requires an accountant initially to establish an accounting strategy for the business. An accountant can help a business owner decide which accounting method (cash accounting, accrual accounting, or hybrid accounting) fits the business structure and will keep the company in compliance with IRS requirements.
In addition to establishing a bookkeeping and accounting process for a new business, an accountant can assist the company well into the future by helping business owners make sense of the numbers and understand the financial impact of almost every decision made within the company.
Accounting uses the numbers recorded by a bookkeeper to reveal a larger financial picture of the business while implementing a financial strategy for the future regarding tax planning, tax filing, forecasting, and general business decisions. An accountant’s accounting strategy will also factor in methods for implementing fraud prevention within your company’s bookkeeping structure.
With a robust accounting strategy in place, many business owners choose to handle bookkeeping and accounting themselves, making use of accounting software such as QuickBooks. Programs like this make bookkeeping and accounting easy for business owners by providing spreadsheets, general ledgers, payroll processing, and invoice tracking all in one place.
Whether you prefer to do it yourself or be more hands-off, consider looking for a QuickBooks ProAdvisor who is certified in the Intuit software. These are typically bookkeepers, accountants, CPAs and small business advisors who offer a range of services, from training to fully managing your books.
Mistakes When Hiring an Accountant or a Bookkeeper
Hiring accountants with the right background and skills can make your accounting team razor-sharp in terms of effectiveness, but it’s easy to make mistakes and hire the wrong personnel. Some of the biggest mistakes made during the hiring process include hiring acquaintances over the most qualified candidates, selecting reputation over practical experience, and overlooking candidates with diverse skill-sets.
Choosing Friendships Instead of Competence
It’s nice to work with people who you like on a personal level, because you spend the vast majority of your work-week with co-workers. That’s why it may be tempting to hire friends or acquaintances over more qualified candidates. Unfortunately, it’s a decision that can lead to all sorts of problems beyond basic inefficiencies, including material accounting errors, missed opportunities, and even co-worker complaints. Hiring someone with solid competencies is preferable, even if they’re new to the organization you work for.
Depending on each business owner’s available time, confidence, and knowledge of finance and accounting, it might be necessary to hire a bookkeeper or accountant — or both, initially. While some business owners choose to handle finances themselves, others want to leave the numbers to the professionals, allowing them time to do what they do best: innovate, create, design, sell, and run their business.
Selecting Reputation Over Practical Experience
When you’re reviewing resumes, lofty degrees and time spent at top accounting firms can seem quite impressive. If you’re looking for an accountant or bookkeeper to fit into an operational accounting department, a former auditor or assurance associate from a national accounting firm may not have the skills needed to do complex account reconciliations or accounting balancing. The inverse is true if you’re hiring someone for a technical accounting position. Writing memos, interpreting accounting standards, and coming up with accounting treatments takes very specific competencies that candidates with operational accounting experience may not have.
Ignoring Non-Accounting Experience
Hiring managers in accounting and finance departments tend to marginalize or even disregard work experience that doesn’t fall into their specific job requirements. For example, accountants with process excellence or operational quality experience can be more valuable than you might initially think.
Quality assurance professionals have diverse, highly practical skill-sets that include flowcharting, process mapping, and procedure writing, just to name a few. These particular skills can be applied in accounting departments to support or even drive process improvement initiatives.
Depending on each business owner’s available time, confidence, and knowledge of finance and accounting, it might be necessary to hire a bookkeeper or accountant — or both, initially. While some business owners choose to handle finances themselves, others want to leave the numbers to the professionals, allowing them time to do what they do best: innovate, create, design, sell, and run their business.