Every business needs bookkeeping and accounting to remain successful, and while these two terms are often lumped together they are not the same thing.
In simplest terms, bookkeeping includes the actual recording of all financial transactions. Accounting is the process of interpreting, analyzing, classifying, reporting and summarizing the financial data.
Bookkeeping is a generalized set of repetitive tasks, while accounting is more complex in its jobs and responsibilities. As a result, accountants require a higher level of education and experience to get the job done right.
What Does A Bookkeeper Do?
The average bookkeeper is in charge of recording basic accounting transactions including:
- Invoices from suppliers
- Cash receipts from customers
- Making sure suppliers are paid in a timely fashion
- Processing payroll
- Changes in inventory
- Petty cash transactions
- Any issues that arise with customer invoices
All of these procedures are mechanical in nature and even if the numbers change, the process follows the same routine month after month. While this data is used to generate financial statements, these statements alone are not considered complete. That’s because information generated by an accountant is necessary for a complete look at your overall financial picture.
What Does An Accountant Do?
Accountants add to the information recorded by a bookkeeper, giving the adequate information necessary for a quality financial statement. An accountant adds the accruing or deferring expenses as well as the accruing or deferring revenue.
Additional tasks handled by an accountant include:
- Creating a general ledger
- Making the chart of accounts
- Creating customized management reports that address any issues
- Designing financial statements
- Making a budget to compare with results
- Completing a set of controls to operate the financial system within
- Using financial information to create tax returns
- Making adjustments to the classification or recordation of transactions in order to meet accounting standards
- Creating a system that records, archives and destroys unnecessary documentation
Medium to large-sized businesses generally have an accountant on board that is in charge of these procedures. These same businesses often have multiple bookkeepers in charge of recording the mass amounts of data that come in and out of the company each day.
Can Someone Be Both A Bookkeeper & An Accountant?
People often confuse the two professions because there is a lot of overlap. Both deal with finances and require understanding of financial data. Some people are trained to handle both bookkeeping and accounting, but not everyone is.
A bookkeeper can successfully tackle their line of work by taking a few accounting courses and grasping a basic understanding of accounting. On the other hand, in order to perform high quality and beneficial accounting services one needs more specialized training. That’s because accounting requires a higher level of expertise in order to handle every aspect from recording data to analyzing it and understanding what it all means. Bookkeeping simply requires someone that knows how to properly record data.
While an accountant is qualified to also play bookkeeper, their time may be better-spent analyzing data as opposed to making note of it.
Does Your Business Need An Accountant?
A few clear signs your business could benefit from the addition of an accountant include:
1. You or the person hired to do bookkeeping is not experienced or familiar with accounting processes.
2. No one at your company specializes in U.S. Tax Code.
3. Accounting tasks are taking you or other employees away from other tasks that directly impact your ability to grow. An accountant not only shows you how to incur growth, but they free up time to pursue endeavors that lead to growth.
4. Your company is rapidly expanding and therefore producing more paperwork and overall number crunching.
5. You notice an increase in revenue but are not seeing an increase in profits. This is not an uncommon problem, but one that should be addressed by an accountant as soon as possible.
6. You have investors that want to see professional financial reports.
7. You plan to expand your business into other states.
If your business has a bookkeeper that you rely on to generate financial reports you could benefit greatly from having a certified accountant take a look at all of the data. There are so many things the trained eye can identify to drastically improve your overall financial picture. Instead of hiring a full-time accountant, you can save money by outsourcing accounting services to DGK Group.