What is a bookkeeper?
Bookkeepers have a primarily administrative role of recording the financial transactions of the organization. They focus on accurately documenting daily transactions and handling financial processes. The scope of the job varies from one company to the next. A bookkeeper’s duties may include:
- Entering daily transactions into accounting software
- Reviewing entered data for accuracy
- Reconciling your organization’s bank accounts
- Handling accounts payable and accounts receivable
- Preparing some financial documents
- Processing payroll
- Assisting staff accountants if applicable
What is an accountant?
An accountant typically goes beyond what a bookkeeper does to analyze and interpret the financial data and advise the company about it. Their role is more analytical than administrative. Common duties of an accountant include:
- Creating financial documents
- Using financial information to write reports
- Monitoring your financial situation
- Offering financial recommendations
- Preparing and filing business tax returns
Similarities between accountants and bookkeepers
Both accountants and bookkeepers take part in the overall accounting process. They typically work together within the accounting department. Specifically, an accountant uses the information a bookkeeper enters to make recommendations and create advanced reports.
While there may be overlap, the roles typically manage different parts of the process. However, both should have key accounting skills, including strong math, data entry, data analysis, account reconciliation and critical thinking skills.
Differences between a bookkeeper and accountant
Comparing a bookkeeper vs. accountant helps you understand the roles and decide which one best fits your company’s financial needs.
Educational requirements
One major difference between a bookkeeper and accountant is the requirements for the positions. Bookkeeping positions generally don’t require a degree. You might prefer candidates who have education or training in the field, but it’s not typically a requirement.
Accountant positions usually require at least a bachelor’s degree in accounting or a related field. Higher-level accounting roles might require a master’s degree or accounting certifications. General accountants typically don’t need to be licensed, but certified public accountants (CPAs) must meet their state’s licensing requirements.
Necessary skills
Despite the similarities in skills, such as basic numeracy skills and critical thinking, there are differences in the skills required. Accountants typically need advanced skills and knowledge, which may include:
- Analytical skills
- Financial report creation
- Reporting compliance
- Tax return preparation
Scope of work
The scope of work of a bookkeeper vs. accountant also varies. Bookkeepers typically handle basic accounting tasks with an administrative focus whereas accountants handle advanced accounting activities. Accountants can handle bookkeeping tasks, but many accountant tasks may be beyond the scope of a bookkeeper.
Think of an accountant as your big-picture financial expert. They look at all your business finances to help you streamline and improve them. Meanwhile, bookkeepers are experts in day-to-day financial tasks. They look at smaller financial components of your business, such as daily transactions, and make sure they’re accurate. An accountant uses the compiled information to reconcile various business accounts on a monthly, quarterly and annual basis.
Decision-making
Bookkeepers typically don’t have decision-making responsibilities. They might have control over how they handle their processes, but their role involves carrying out specific tasks. Accountants often make financial decisions or advise the company to do so.
Pay
The pay discrepancy between a bookkeeper and accountant is another noticeable difference. Bookkeepers typically make significantly less money than accountants earn. The average bookkeeper salary is $22.39 per hour. Accountants are often salaried, earning an average of $64,119 per year, which equals about $30.82 per hour.
The amount you pay an accountant versus a bookkeeper depends on several factors, including your location and the scope of the job. When you hire a new accountant or bookkeeper, their qualifications also matter. For example, certified public accountants are typically paid more than accountants.
Bookkeeper vs. accountant: Which one to hire
Knowing the difference between a bookkeeper and accountant helps you decide which one is best for your company. Every organization is different when it comes to finances. Look at the benefits of hiring each role and evaluate your situation to decide.
Benefits of hiring a bookkeeper
Reasons to hire a bookkeeper include:
- Accuracy for day-to-day transactions
- Ability to handle simple financial tasks
- Compliance with tax regulations
Benefits of hiring an accountant
If you hire an accountant instead, you gain these benefits:
- Deeper financial insight
- Stronger knowledge of accounting principles and reporting requirements
- Ability to recommend and implement financial controls and processes
How to choose between a bookkeeper vs. accountant
Consider these details about your business to help you decide which to hire:
- Volume of daily transactions: If you have many daily transactions, you might prefer a bookkeeper, whose primary job is recording those details.
- Complexity: Small businesses with simple business structures may only need a bookkeeper to manage finances. If your business is highly complex, an accountant provides financial guidance.
- Financial goals: If you’re looking for an informed financial strategy, an accountant offers that expertise. When your focus is keeping up with your day-to-day financial situation, you may want to hire a bookkeeper.
- Industry regulations: Industries with strict financial reporting requirements and regulations may benefit from having an accountant. They receive training to help them ensure compliance.
- Budget: Accountants typically earn a higher salary, so your budget may be a factor. However, the financial guidance from an accountant could improve your cash flow.
- Organizational changes: If you anticipate changes to your company, such as an expansion, an accountant could be beneficial. They evaluate the situation and help you navigate financial decisions as your organization evolves.
Hiring an employee vs. using accounting and bookkeeping services
Regardless of whether you choose a bookkeeper or an accountant, you have the option of hiring them directly or using services. Outsourcing business processes such as bookkeeping and accounting is often a cost-effective option for smaller businesses. You get the accounting services you need on a limited scale and can potentially save money.
Accounting and bookkeeping services often charge a higher hourly rate than you would pay an employee. However, you only pay for the amount of time they spend on your accounts. If you only need a few hours of bookkeeping or accounting per month, you may save money by hiring a contractor or temporary employee.
To decide which option is best:
- Determine how much accounting and bookkeeping work you have each month.
- Compare the costs of accounting and bookkeeping services in your area to estimate your monthly or annual expenses.
- Next, calculate the cost of having an accountant or bookkeeper on staff instead.
Consider the advantages and drawbacks of each option to make your final decision.
FAQs about accountant versus bookkeeper
Do I need both a bookkeeper and an accountant?
You don’t need to hire both a bookkeeper and an accountant, but you may want to depending on your company’s size and needs. If you decide to hire a bookkeeper, you can use an external accounting service for certain tasks, such as filing taxes or seeking financial advice. If you have a larger company, you may benefit from hiring both roles. Determine the scope and amount of accounting work to determine if you need to hire for both positions.
Are there alternatives to hiring a full-time bookkeeper or accountant?
Small businesses might not have enough work for a full-time bookkeeper or accountant. Budgeting for the expenses of a full-time employee is also a consideration. One alternative is to hire an office manager with bookkeeping skills. This allows you to hire one employee to handle varied responsibilities, which can be more cost-effective than hiring multiple people. Some small business owners use accounting software to track finances themselves. This may work when your business is small, but it can become time-consuming as the organization grows.
When is it time to hire a bookkeeper or accountant?
If you currently handle your bookkeeping yourself, consider hiring a bookkeeper or accountant when it becomes too time-consuming or complex for you. Another sign that hiring may be beneficial is if you notice financial errors. Many companies hire a professional when they need advanced financial support beyond their expertise.
