Knowing the Numbers: Does Your Business Need a Bookkeeper or an Accountant?

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? Which one should you hire, and when?

Bookkeepers

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.

Accountants

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.

Which Is Right for You?

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.

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.

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  1. […] There are two main types of people a small business owner might consider hiring: a bookkeeper and an accountant. Many people use these terms interchangeably, but there are some distinctions between a bookkeeper and an accountant. […]

  2. […] Knowing the Numbers: Does Your Business Need a Bookkeeper or an Accountant? […]

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