Often, the terms “bookkeeping” and “accounting” are used interchangeably, but although they have things in common, they are not actually the same. Both bookkeepers and accountants do one thing - they work with finances for small businesses. There are several ways that they differ, though, and before you choose which one is best for your needs, it is important to understand the differences. There are several reasons to choose a small business accountant in Charleston over a bookkeeper.
What Does a Bookkeeper Do?
Bookkeeping is like the first step in accounting for small businesses. Bookkeepers help by inputting financial transactions into journals or ledgers, and then they hand those off to the accountants who take it from there. That doesn’t mean that accountants don’t also input financial data; it is just the place where bookkeepers’ and accountants’ positions merge.
Bookkeepers help track the finances of a small business so that the company can get a glimpse of how much is coming in and how much is going out. Bookkeepers also help to record all the information that is necessary for tax purposes. The six common processes that bookkeepers perform are:
- 1. Managing payroll
- 2. Recording the income generated and the expenses that go out
- 3. Creating and paying invoices for the company
- 4. Settling the balances of your financial data with bank transactions to ensure that they match
- 5. Track accounts receivable (money owed to you) against accounts payable (money you owe)
- 6. Maintaining a ledger or journal of finances
- a. Post debits and credits
- b. Ensure that the credits and debits balance
- c. Record all expenses and income
What Does a Small Business Accountant Do?
The accountant goes a few steps further to take the recorded transactions and make sense of them. Once the data is entered (either by a bookkeeper or an accountant), an accountant uses the data to provide insight into a company’s financial health and daily processes. The accountant, therefore, does the same first steps as a bookkeeper, but then makes the data usable to help guide decisions for the company and analyze ways to cut costs and increase overall profits. The common processes that accountants perform are:
- 1. Prepare financial analysis and statements to gain a “big picture” of the health of your financial status. Statements include:
- a. Balance sheets - the balance sheet gives you a good look at your financial health at any given time by calculating Equity - Liabilities = Assets
- b. Cash flow statement - a snapshot of what cash is flowing into and out of your company’s financials at any point
- c. Income statements - A track of all expenses and income at any time
- 2. Analyzing ledger and journal entries to make necessary adjustments
- 3. Providing tax help and advice and completing your tax returns
- 4. Suggesting financial advice and how your choices are affecting your company’s overall financial health
- Both work to organize your financial data
- The goal is to improve your company’s financial health
- Their roles can sometimes overlap
- They both require a certain level of financial education and expertise
- Both can help with tax returns
- Bookkeepers input data and balance ledgers; accountants analyze, interpret, arrange financial statements, and can file tax returns
- A bookkeeper needs to have a minimum of 2 years and an associate's degree, but does not qualify to earn extra certifications. An accountant requires a bachelor’s degree in accounting or finance, and they qualify for other certifications (like becoming a Certified Public Accountant)
So How Do You Know Which is Best for Your Company?
When deciding whether a bookkeeper is enough for your small business needs, or if you need a little bit more by hiring a small business accountant in Charleston, it’s a good idea to weigh their similarities and their differences.
Things They Have in Common
Where They Differ
If you run a small business, you need help from a financial person to make sure that you are keeping track of what is going in and what is going out. But for your overall financial health, it is important to use the data that you have for more than reconciling with the government for tax season.
Your daily financial information can help to guide you about financial decisions for the long term and the big picture of where you want your company to go. If you aren’t using your financial data to aid you daily, you are missing out on a huge wealth of information that can really improve your financial standing.
At Current Accounting, we believe that a small business accountant is the way to go for any small business looking to not just survive, but to thrive! If you are ready to take your company to the next level, let us help. Contact us to schedule your appointment for an evaluation today!