In my experience, many people equate accountants and bookkeepers as being the same. While some of their roles overlap, they do provide different services. Both roles are integral pieces to your business.
Traditionally, bookkeepers worked on the books each day in the ledgers. There are a few different types of ledgers and journals that are important to keep in a business. These used to be actual books. The bookkeeper wrote down each financial transaction in the correct ledger or journal. At the start of the next month, they would manually review each ledger and journal to confirm that there were no duplicates or errors. Also, they would compare the bank statements to the account ledgers. Reconciling is a vital part of bookkeeping to ensure that everything is accurate. Once completed, financial reports were created for management review. Nowadays, bookkeepers use software to manage transactions, reconcile the accounts, and create reports.
There is a myth that bookkeepers do not need any special training. Many people believe it is not a difficult job. That all you have to do is a little data entry. This could not be further from the truth. Bookkeepers need to understand the basics of both accounting and the bookkeeping process. Also, they need to know how to use the specific software chosen for bookkeeping.
Otherwise, the chance of errors and inaccuracies is pretty high. A business would not be able to trust the financial reports in this case. Accurate and error-free financial reports are important for making solid business decisions.
Cleaning up books from a bookkeeper who does not understand the process is often costly. It is also a great reason to work with a great bookkeeping professional.
With the advent of virtual bookkeeping, bookkeepers can help with tasks from anywhere. They can send invoices (accounts receivable), pay bills (accounts payable), and handle payroll. Basic analyses of financial reports, forecasting, and creating budgets are other possible services.
Accountants create financial models from the information entered by bookkeepers. They assist with more complex issues, prepare tax returns, and provide tax planning and advice. An accountant certifies the financial statements of a business for receiving lending. This list is not complete, as it is a basic overview.
While accountants may offer bookkeeping services, their focus is typically on tax compliance. They focus more on interpretation, risk analysis, tax planning and tax preparing. They also ensure compliance in the business’ accounting practices.
Not all accountants specialize in a specific industry, which could make a difference. Not all accountants keep up-to-date with current uses of bookkeeping software either.
Remember that your bookkeeper and your accountant work together to best serve the financial needs of your business.