Both bookkeepers and accountants are critical for handling the financial side of businesses. Although they share common goals, they support your business in different stages of the financial cycle.
Most people don’t know the key differences between a bookkeeper and an accountant. This article will educate you on the differences between these two roles. We’ll also explain the importance of each.
What is a Bookkeeper?
Bookkeepers are usually employed by small to mid-size companies to consistently record and process transactions. Moreover, they handle some ongoing administrative duties, so you don’t have to.
Some of the responsibilities of a bookkeeper are:
– Recording sales
– Recording purchases
– Collection of accounts receivable
– Payment of bills
– Producing invoices
– Company Payroll
– Maintaining and balancing ledgers
Depending on the company, there are many other things bookkeepers can manage or assist with.
In conclusion, bookkeepers are more transactional and administrative. They handle the day-to-day transactions for your business and keep your finances organized.
The Importance of a Bookkeeper
Bookkeeping is an essential role in your business. However, finance and organization might not be your greatest strength. Hiring a bookkeeper ensures that your company’s books are being professionally managed. It also reduces your time commitment so that you can focus on other aspects of your business.
By keeping accurate records, your business can get a snapshot of its health in the form of financial statements on an ongoing basis.
Being organized also makes your accountant’s job far more straightforward, meaning they don’t have to spend as much time submitting for taxes each year. Being organized can save a lot of back and forth talk between the accountant and business owner.
Furthermore, the importance of bookkeeping goes beyond staying organized. Also, diligent tracking of all incoming and outgoing expenses can help you strategize for the future. These are just a few benefits of working with a professional bookkeeper.
What is an Accountant?
Accountants review and analyze the bigger picture of a company’s finances. They can be hired part or full time as needed to suit the needs of your business. Small to medium-sized businesses work with an accountant at least once a year. This annual accounting meeting is paramount for overall financial analysis and tax filing.
Accountants use the information that’s prepared by bookkeepers to generate financial models and start strategic tax planning. Most importantly, they give business owners a deeper understanding of profitability and other financial information. Compared to bookkeepers, the role of an accountant is more subjective.
Some typical responsibilities of an accountant are:
– Preparing company financial statements
– Analyzing costs of operations
– Completing income tax returns
– Annual tax planning and filing
– Helping the business owner understand the financial impact of certain decisions
Similar to bookkeeping, some responsibilities of an accountant greatly depend on the company they work with.
Importance of an Accountant
If you own a business, you probably understand the importance of an accountant already. They play a vital role in any company that’s looking to grow and remain profitable.
Aside from painting a clear financial picture for business owners, they can also help with legal considerations.
Great accountants make it a priority to remain updated on current financial laws and requirements that could affect their clients. Consequently, they can be even more advantageous to work with during times where government support programs are available. For example, CEBA and CEWS are available as a result of the Covid-19 pandemic.
Bookkeepers and accountants complement each other and ensure you’re on top of your company’s financial status. In conclusion, a smoothly functioning business should have both roles involved on at least a part-time basis.
Accurate financial records and balanced finances produced by a bookkeeper, coupled with financial strategy and tax filing by an accountant, impact every company’s long-term success.
If you’re considering hiring a bookkeeper for your business, we recommend reading our blog on 3 Signs You Need to Hire a Bookkeeper.