Bookkeeping vs. accounting

What exactly are you looking for when you decide you need help with your numbers?

There is going to be a day in your small business life where you decide you need accounting help. It could be right at the start of your company, to help set up things correctly, or it could be a couple of years in when you are too busy to do everything. Do you need a bookkeeper or an accountant? Here’s some guidance.

Bookkeeper

A bookkeeper is the person who will keep you organized on a monthly basis. You have invoices to send out, bills to pay, receipts sitting around, payroll and bank accounts, and you’re not quite sure how to book any of it. This person will help you with all of that.

Usually a bookkeeper comes in when you have a computerized system already set up. They can pick up where you left off, even if you left off months ago. They are task masters, similar to having a house cleaner come in to clean once or twice a month. Think transactional.

You can find bookkeepers that specialize in a specific industry, or are experienced in the accounting software you use, though general, all-around bookkeepers are pretty good at all of it. Bookkeepers are not required to have special education in accounting.

Accountant

An accountant is someone who analyzes your company’s activity as a whole and provides insights on your company’s financial health. They work with you on a monthly, quarterly, or annual basis.

Now, an accountant can do your bookkeeping for you, and also provide the higher-level analysis on a regular basis. Your accountant may or may not be a CPA, and having a CPA is important mainly if you are a publicly-traded company (can complete an audit of your books) or want this person to sign off on your taxes (can represent you before the IRS). An accountant is not necessarily a tax preparer, but may be. So choosing an accountant requires a bit more thought on what you actually want this person to do for you.

Like bookkeepers, you can find accountants that specialize in a specific industry, but a general small-business accountant is a good pick. Accountants are required to have a Bachelor’s degree in accounting, and a CPA must have that plus have passed the CPA exam.

How do you choose?

It boils down to what you really need right now and your preferred way of working.

Needs: at some point in your business growth, you’ll probably need all the people. You will not want to be doing your own taxes when you have employees and assets and such, and at some point, you will just get too busy to do everything. It’s very common to have a team of finance people, but if that sounds overwhelming at this moment, go with the one that is the most immediate need. If you need tax help, find a good tax accountant. If you want help with some weekly accounting tasks, get a bookkeeper. If you need help creating an accounting system or get financial statements ready, get an accountant. If you’re thinking, why can’t I get one that does it all?, that’s a great point and that is very rare. You can hire an accounting firm, and they will have a team of professionals that cover all these for you at the appropriate time of year (example: you’ll probably only talk to your tax accountant in January-March).

Work style: Know thyself. If you’d like to have up-to-date books at any given moment for reference, it won’t do you any good to hire an accountant you talk to once a year. This is an array or choices out there to fit your schedule and how you like to work. This also includes if you prefer to chat with this person, or only email, or want to work side-by-side.

I’d be remiss if I didn’t mention cost. You may want to hire that firm, or that dynamic accountant, but it may be beyond your price range right now. That is AOK and it’s smart to save some money. If you really want a monthly bookkeeper but financially can only swing that quarterly, go with it. It’s the best solution at this moment. Also consider not hiring the cheapest option out there – you usually get what you pay for in this arena.

I wrote a separate post on how to choose an accountant, and that offers questions to ask yourself to narrow down what you’re searching for in the financial world. I think you’ll enjoy it – check it out here.

As a business owner, you’re most likely hiring a lot of different contractors to help with all aspects of your business. It’s not easy. I do hope this helped encourage you to think about your accounting needs and get a better understanding of who you may want to invite onto your team. Go you!

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