Overview of bookkeeping vs. accounting

Bookkeeping and accounting are important and distinct facets of maintaining and optimizing your organization’s financial health.

What is bookkeeping?

Bookkeeping is a type of record-keeping and transactional administrative role that handles daily tasks. These professionals are responsible for keeping day-to-day bank reconciliations, journal entries and other financial transactions organized and accurate. Their work provides short-term insights and data that other financial professionals can use to inform broader strategies and other decisions.

What is accounting?

In many ways, accounting is a continuation of the groundwork that bookkeeping provides. Using bookkeeping records and other information, accounting involves high-level data research, interpretation and presentation to help generate financial insights and develop strategies and models. The purpose of accounting is to help organizations create a better comprehension and awareness of profitability, cash flow, tax filing and financial position.

Key differences between a bookkeeper and accountant

Bookkeeping and accounting often have overlapping functions, but each role serves different purposes. Below, learn the key differences between an accountant and bookkeeper.

Functions and tasks

Bookkeepers are generally responsible for short-term tasks where they must ensure micro-level accuracy, record-keeping and organization. Their typical responsibilities include:

• Managing payroll
• Recording financial transactions
• Preparing invoices
• Posting debits and credits
• Maintaining and balancing accounts and ledgers
• Ensuring financial data accuracy
• Communicating short-term finances with relevant colleagues or managers
• Gathering and preparing data and statements for other professionals

In comparison, accountants contribute to long-term financial strategy by focusing on tasks that relate to taxes, financial health and other aspects of finances. They perform duties such as:

• Using bookkeeping data to provide financial analyses and business insights
• Preparing and filing tax returns and other tax documents
• Advising business owners and managers regarding financial health, compliance and taxes
• Performing financial audits to verify records and statements
• Generating financial statements such as income statements, balance sheets and cash flow records
• Assisting with business loan applications and offering advice regarding interest rates, terms and conditions

Credentials

Some professionals become bookkeepers with only a high school education, but many opt to earn more advanced credentials. Bookkeepers sometimes begin their professional journey by gaining experience with a small business, completing an online or in-person bookkeeping certification course or enrolling in college or university programs.

Accountants, however, must earn certain credentials to perform their job. In addition to a minimum of a bachelor’s degree in accounting or finance, many accountants complete advanced programs to earn a master’s degree in accounting.

Although not all accountants earn a Certified Public Accountant designation (CPA), each state’s Board of Accountancy provides this license to qualified individuals to help enforce professional standards in the industry. To qualify for a CPA license, accountants must meet rigorous education, work experience hours and examination results. They also need to maintain their certification and keep updated on tax regulation changes.

Skills

Accountants and bookkeepers possess many similar skills that they apply to different tasks. These include:

• Mathematics: Both accountants and bookkeepers must be able to accurately perform basic mathematics, but accounting often requires more advanced mathematics for analysis and strategy.
• Attention to detail: Bookkeepers must be able to keep track and ensure the accuracy of all data to ensure that records provide reliable information to accountants and other professionals. Accountants should be able to verify record accuracy and identify details that help shape strategies and analysis.
• Problem-solving: Bookkeepers should possess strong problem-solving skills to help balance accounts and identify discrepancies, and accountants should be able to respond to organizational goals with data-based solutions.
• Communication: Written and verbal communication are important skills for bookkeepers who report to managers and work with vendors, contractors and employees. Strong communication can help accountants discuss presentations, reports and other financial topics.
• Technology: Both professionals should be adept with common bookkeeping and accounting software

Accountants perform more financial strategy-related tasks for your organization, which means they generally require more advanced analytical skills than bookkeepers. They should be able to analyze data to identify strengths and opportunities that align with organizational and departmental goals.

Salaries

Although salaries range depending on factors such as location and industry, accountants typically earn a higher salary than bookkeepers, as their pay reflects their level of education, experience and expertise.

The median wage for a bookkeeper is $42,642 per year or $20.91 per hour. Accountants earn a median wage of $60,647 per year or $27.16 per hour.

Read more: How Much Do Accountants Cost Your Business?

Should you hire a bookkeeper or accountant?

It can be difficult to determine when it’s appropriate to hire a bookkeeper or accountant to help with your small business. Some signs that it’s time to hire a financial professional include:

• Complex tax needs
• Your business is consistently growing
• Bookkeeping and accounting tasks take you away from business priorities
• You lack the tools to complete financial tasks

Bookkeepers are likely a better hire for your small business if you have a high volume of daily transactions, payrolled employees and basic recordkeeping needs. In contrast, an accountant may be the better option if you need support with taxes, strategy and operations and have adequate financial resources.

Keep in mind that although bookkeepers aren’t qualified to perform accounting tasks, accountants are usually equipped for bookkeeping. That means you can hire an accountant to perform both roles but may lose some value by compensating them with an accountant’s salary for bookkeeping tasks.

Related: Should Your Business Hire a Bookkeeping Service?

How to hire a bookkeeper or accountant

To start your hiring search for a bookkeeper or accountant, determine your individual business needs. Consider factors such as:

• Average market rate: The average salary of each professional based on your business’s location
• Services needed: The scale of your business needs and how many hours per week employees should work
• Complexity of work: The complexity of your business needs, transactions and taxes
• Contract or payroll: Contracting a professional can help you scale according to your business needs, but a payrolled employee gives you more control over financial processes

Read more:How to Hire an Accountant

FAQs about accountants vs. bookkeepers

What are the types of accounting designations?

In addition to a CPA license, there is an array of accounting designations that professionals can earn, some of which are geared toward specialized accounting roles. These include:

• Chartered Global Management Accountant
• Certified Internal Auditor
• Certified Fraud Examiner
• Chartered Management Accountant
• Chartered Financial Analyst
• Certified Information Systems Auditor

Do I need a bookkeeper if I use bookkeeping software?

Bookkeeping software can help you keep track of payroll, records and transactions, but a bookkeeper can help manage the software so you can focus on other aspects of your business.

Can accountants and bookkeepers save money for small business owners?

Although accountants and bookkeepers represent additional payroll costs, they may provide potential advantages that help your business improve its long-term growth, cost efficiency and bottom line.