A Bookkeeper and an Accountant: the Dream Team to Help You Scale Your Business
Givens LLP | October 20, 2022
Entrepreneurs often try to do everything they can on their own, including balancing their books. In those first few years of a new business, bootstrapping the business and DIY-ing as much as possible can make a huge difference and save new business owners a lot of money.
However, as many business owners who’ve made mistakes in the name of saving money will tell you, one of the places you should not be cutting corners is your accounting. Even with a basic understanding of bookkeeping or accounting, as a new business owner, your time would be better spent focused elsewhere. The biggest risk of doing it yourself is missing out on expenses and coding errors that end up costing you money or more in tax.
So what is better for small businesses, hiring a bookkeeper or an accountant? The truth is, you may not need to choose. Read on to find out more.
What Does an Accountant Do?
If you’ve been trying to understand the difference between an accountant and a bookkeeper, you’re not alone. It’s something many business owners face when trying to decide between hiring one or the other.
Though often, the two terms are used interchangeably, they are, in actuality, two distinct professions with different requirements and credentials. Accountants will use financial data recorded by bookkeepers to offer insights on the finances - and business as a whole - to business owners. Some of the key responsibilities that accountants take on include:
- Tax planning
- Preparing and filing tax returns.
- Analyzing financial information to give advice and insights to business owners.
- Helping business owners understand the impacts of potential economic decisions.
- Preparing financial information, performing reviews and audits, preparing financial reports (balance sheets, income statements, tax returns, T4s/T5s), and generating reports.
- Supplying data for business trends, forecasts, and growth opportunities.
In his book, Accounting for Dummies, John A. Tracy says, “Accountants look at the big picture. [They] step back and say, ‘We handle a lot of rebates, we handle a lot of coupons. How should we record these transactions? Do I record just the net amount of the sale, or do I record the gross sale amount, too?’ Once the accountant decides how to handle these transactions, the bookkeeper carries them out.”
What Does a Bookkeeper Do?
While accounting is a subjective assessment of what financial data implies for businesses, bookkeeping is a comprehensive recording of all sales, purchases, and transactions that a company makes.
Maintaining a general ledger - a record that documents all sales, purchases, and expense receipts - is one of a bookkeeper’s primary responsibilities. A general ledger may be as simple as a piece of paper or as complex as specialized bookkeeping software, such as Xero or Quickbooks. Every single purchase and sale conducted by a business must be recorded in this ledger, with some transactions potentially needing supporting documents as well.
Other general duties of a bookkeeper include:
- Communicating with business owners on an ongoing basis.
- Handling accounts payable and receivable.
- Potentially managing some payroll.
- Reconciling bank statements every month.
- Posting credits and debits.
- Producing invoices.
Bookkeepers should, essentially, be involved in the day-to-day operations of a business in order to keep accurate records of all financial transactions and activities of the company.
There is no formal education needed to become a bookkeeper, which is the one area where it varies significantly from an accountant. However, an aspiring bookkeeper should have a good grasp of financial knowledge, topics, and terminology. Often, a bookkeeper’s work is overseen by the business owner themselves or an accountant.
Which One is Right For You?
When deciding whether to hire a bookkeeper or an accountant for your business, there are many things to consider. As you start out, you may be able to handle balancing your own books and recording data from your financial transactions - and there are, of course, easy-to-use software out there that can significantly aid in this - but what about as your business grows?
As a business owner, you are often too busy to spend the amount of time needed to keep up with your books and financial statements. This is where an accountant comes in. At the very least, according to NerdWallet, every small business owner should have an accountant on hand to prepare and file their tax returns. But hiring a team to handle all of your daily accounting and financial needs and the bookkeeping for your company will save you time and money in the long run. The expert knowledgeable in business finance such a team offers can be priceless for small business owners.
If you’re just starting out in your entrepreneurial journey, hiring a team of experts that can handle all of your bookkeeping and accounting needs will not only save you money, but also time and stress. If you want your business to succeed and scale, bringing in both bookkeepers and accountants that can work seamlessly and synergistically together to provide your business with the financial insight, advice, and help you need to scale and achieve your goals is the way to go.
At Givens LLP, your future is our focus. Let our team of experts help push your business to new heights. Contact us today to learn how.