You finally decided to take the plunge and run your own business…. congratulations! Whether you have just started or are building your business up slowly over time, you probably have had many questions like what are the 3 key differences between accountants and bookkeepers and don’t they both help me keep track of my money?
The simple answer….. yes, but there is a difference. It lies in how they help you keep track of your money. Still confused? I don’t blame you. Let’s look at 3 key differences and hopefully clear up some confusion as we go.
1) How does a bookkeeper and accountant help my business?
Bookkeepers help businesses with their day-to-day money management, finding order in the chaos that are receipts and income.
They undertake tasks such as payroll, accounts receivable, accounts payable, bank reconciliation, and the tracking of funds and receipts. By keeping records of all transactions, bookkeepers help set up logical processes to support a smooth-running business. Good bookkeepers not only make sure the lights stay on but also help owners track their money to make sound decisions as issues arise.
These individuals take the information organized by the bookkeeper and present comprehensive reporting, either quarterly or yearly, to understand the big picture while digging deep into the details to locate potential problems and recommend solutions.
They strive to make the information from these reports easily understood by the owner and any other stakeholders, such as partners, investors, stockholders, employees, etc.
What about taxes?
While all accountants are familiar with tax law and have the expertise to file taxes, only some prepare taxes. These are the tax specialists who have more experience collaborating with companies to ensure they not only pay their taxes on time, but can find the most beneficial tax breaks. Tax specialists do not need to be Certified Public Accounts (CPAs). They just need to have the knowledge and experience to best serve their client which makes them the best choice for all tax questions and preparation.
2) What certifications are needed for a bookkeeper and an accountant?
Bookkeepers do not require a formal education, but experience plays a critical part in successful bookkeeping.
Strong mathematical and organizational skills are mandatory, along with an eye for details and knowledge of accounting software. The best bookkeepers are personable, easy to talk to, and have a knack for explaining and fixing financial issues. Several organizations offer certification training or courses and although certification is not needed, it can provide more insight to help clearly define the accounting processes.
In most cases, accountants obtain a minimum of a bachelor’s degree.
They often pick a branch of accounting they want to specialize in. For examples. Certified Public Accountants (CPAs) take extra time to learn not only the basic accounting functions, but also income tax, forensic accounting and internal auditing. Becoming a CPA is a different matter that requires certification and more education, often leading to a master’s degree. They spend many hours studying for the Uniform CPA Examination.
3) Is there a difference in cost between a bookkeeper and an accountant?
The national average cost to hire a bookkeeper is $34 per hour but cost will vary depending on what services you need.
If you only want someone to come in and prepare payroll to be sent out, it may cost less. If you want someone to come in and balance your checkbook, keep track of all accounts payables and receivables, and formulate monthly reports; the cost may increase.
Sit down and talk to the bookkeeper you are interested in working with about the pain point(s) of your business. This conversation will allow you to understand their offerings and allow the bookkeeper to know how best they can make a positive impact on your business.
They charge according to their specialties. The national average cost to hire an accountant is $175 per hour.
As with bookkeepers, cost varies depending on what job you need done. Make sure to speak with the accountant directly to ensure they can meet your needs in the most cost-effective way possible.
What about tax preparation costs?
The answer will depend on the complexity of your tax situation and the level of certification the accountant holds, creating a range from hundreds to thousands of dollars. It doesn’t seem fair to give an estimated hourly cost without knowing what services your company needs.
To sum up…
To run an efficient and profitable business, you need to incorporate both bookkeeping and accounting.
Bookkeeping can be time-consuming and is something that can easily slip to the sidelines when other business issues arise. Remember, without solid bookkeeping, you may not have all the information needed to make sound decisions. You will also need a trustworthy accountant for tax preparation, unless you have a firm grasp of tax law.
As your company grows, the need for both accountants and bookkeepers increases. Establishing good working relationships with both a bookkeeper and an accountant in the younger years of your business will give your business a firm foundation.
Only you know what you are capable of doing.
If you have the time and organization to do your own bookkeeping, that is always an option, but it is important to be honest with yourself when you consider this course.
If you have any doubts about your abilities or questions of how-to setup your books, reach out to someone who does professional bookkeeping. A good bookkeeper can be a true asset to your company and give you peace of mind.