May 1 2016
There may come a point in your business when you realize that you need some help with your financial management. Maybe you're just starting and you know you don't want to focus your time and energy on the books. Perhaps you've been handling the books for several years, but now the business is growing and you don't have the time to devote to it as you once did. The problem is that you're not sure if you need a bookkeeper or an accountant, or both. In this post, we'll explain the differences between the two roles so you can make an informed decision when the time comes.
Let's start by taking a look at the credentials of bookkeepers and accountants. Bookkeepers generally are required to have either an associate's degree or two to four years of experience. Their work is usually overseen by either the business owner or the accountant.
Accountants usually hold a bachelor's degree in accounting, although a degree in finance is also permitted. Accountants with a certain amount of experience and education can earn the title of Certified Public Accountant (CPA). To become a CPA, an accountant must pass an exam in addition to attending continuing professional education courses each year. Now let's delve into the role that each plays in the financial management of a business.
The Role of the Bookkeeper
The bookkeeper is responsible for recording the day-to-day transactions of a business. Purchases, receipts, sales, and payments get recorded in the journal or general ledger. Using bookkeeping software (Quickbooks, Xero, Wave, etc.), they use these entries to generate a trial balance where the debits and the credits match. Bookkeepers are usually responsible for posting debits and credits, producing invoices, maintaining and balancing the general ledger, and payroll.
Because they are immersed in the minute details of the accounts, the bookkeeper will often be the first to spot issues and be able to bring potential problems to the attention of the business owner and the accountant.
The Role of the Accountant
An accountant or CPA will verify the data entered by the bookkeeper and then analyze that information to report on the health of the business. The accountant will be responsible for preparing adjusting entries, preparing the company's financial statements, analyzing the operating costs, and completing tax returns. They will also create forecasts and budgets and assist the business owner by making recommendations on spending and capturing opportunities for growth. Businesses can also benefit by utilizing their accountant for tax planning in order to minimize future tax liability.
If a business has a complicated sales process (such as coupons or memberships) or carries an inventory, the accountant can decide how a business should handle these financial transactions and the bookkeeper will then carry out the process. Having an accountant also gives you another set of eyes on your books, helping to minimize the threat of fraud.
By utilizing the skills of both a bookkeeper and an accountant, a business can be set up for long term success. We'd be happy to chat with you about how we can help grow your business with you. You can set up a free consultation here.
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