When new small business owners consider their entrepreneurial finances, it’s common for them to feel confused about the differences between a bookkeeper and an accountant. If you find yourself in this position, make sure you understand the services each provides so you can make the right choice for your business.
Understanding the Role of a Bookkeeper
A bookkeeper is a person who performs operational and administrative tasks relevant to managing a client’s business finances. He or she performs a wide range of functions, including the following:
• Processing of employee paychecks
• Creating receipts and invoices for each client’s expenses
• Preparing reports such as profit and loss statements
• Reconciling client financials with bank statements
• Making payments for clients and tracking expenses
It’s important to note that a bookkeeper cannot give you legal advice or business strategy. However, a bookkeeper will always let the client know that the requested services are outside his or her area of specialization. Hiring a bookkeeper is an excellent choice for the day-to-day management of your business as well as monthly and yearly tasks.
What is an Accountant?
An accountant provides financial and high-level tax advice. This person files your company’s tax documents and payments, including quarterly payments to your state government and the IRS. Additional roles of an accountant include:
• Analyzing company reports to determine where the client can reduce costs
• Setting up the company’s financial and tax structure
• Estimating future tax payments
• Meeting with management to discuss the company’s financial health
• Assisting the bookkeeper as needed
As a quick comparison, an accountant manages the client’s taxes and provides financial advice while a bookkeeper manages its financial transactions on an ongoing basis. If you plan to outsource this work, it’s possible but not necessary to hire an accountant and bookkeeper from the same company. Just be sure that you interview people for each position thoroughly and that you check references from former employers and clients before moving ahead with hiring or contracting.
Similarities and Differences Between a Bookkeeper and an Accountant