Does Your Business Need a Bookkeeper or an Accountant?

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Looking to hire a bookkeeper or an accountant for your business, but are not sure which will best suit your needs? We will go over the different tasks each professional is capable of performing to help you decide whether to hire a bookkeeper or accountant.

Key Facts:

  • Bookkeepers are the record keepers and accountants are the analyzers and advice givers.
  • While accountants can perform the tasks a bookkeeper typically does, a bookkeeper cannot perform most accounting tasks without the appropriate degrees and certifications.
  • Depending on your financial needs you may need a bookkeeper or an accountant, or both.

In order to be successful in any business, you have to be aware of your financial situation. This means your financial records need to be up to date and accurate, so you are ready to make financial decisions at any time.

As your business becomes more successful and grows, your finances may become more complex and timelier to handle on your own. You may be ready to outsource the job and now it is time to decide if you need an accountant or a bookkeeper. While some people consider these two professions nearly identical, they have significant differences which should be taken into consideration.

What is bookkeeping?

Bookkeeping is the occupation of keeping the financial records of a business. Bookkeepers keep track of your business’s daily transactions and organizes them into the appropriate journals and ledgers.

What is accounting?

Accounting is the process of summarizing, analyzing, and reporting the financial data of a business. Accountants look at the data a bookkeeper gathers as a whole and interprets it to help the business owner make financial decisions.

A Bookkeeper’s Role

Bookkeeping is a process that has been used throughout history, all the way back to when it was done on slabs of clay. A bookkeeper keeps track of all the money going into and coming out of your business. Bookkeepers create the records needed for an accountant to do their job successfully.

Typically, a bookkeeper will record all the financial transactions, and their accompanying documentation if required, that take place every day and classify them as debits or credits. They will keep the records current and accurate, and ensure the accounts are balanced. They are also capable of creating invoices and overseeing payroll.

The main goal of a bookkeeper is to maintain the general ledger. The general ledger is the main accounting record for your business. A bookkeeper can use physical books to track the records for your business, but it is more common to utilize computer software.

What qualifications should a Bookkeeper possess?

The requirements to become a bookkeeper are quite simple: mathematical skills and a keen eye for detail. There are no official educational degrees or certifications that are mandatory to become a bookkeeper. That does not mean potential employers cannot have their own requirements for hiring.

One way to become certified as a bookkeeper is through the American Institute of Professional Bookkeepers (AIPB). To earn a certification from AIPB, a bookkeeper must have at least two years of full-time experience and be able to pass the certification exam. You must also sign a code of ethics and acquire 60 Continuing Professional Education Credits every three years.

Another way to become certified is through the National Association of Certified Public Bookkeepers (NACPB). The requirements for NACPB are to complete the Accounting Fundamentals course and pass the certification examination. NACPB also offers other accreditations including Payroll Certification and QuickBooks Online Certification.

Although it is not required, having a certification shows potential employers that you are dedicated and qualified to get the tasks completed.

How much does a Bookkeeper typically cost?

There are many factors to consider when figuring out how much your bookkeeper will most likely charge you. On average, bookkeepers tend to make just under $20/hour, but there are three key aspects that can influence the overall cost.

First, it depends on the tasks you need completed by your bookkeeper. It will cost more if you want your bookkeeper working full-time, rather than have someone come in on a monthly basis to balance the books. You should determine which tasks you would like to outsource to your bookkeeper and how often these tasks should be completed, then you can figure out if you need full-time, part-time, or occasional help.

Another thing to consider is you will pay more for someone with more experience and knowledge than someone just entering the field. A bookkeeper that is certified or holds a license is recommended for those businesses that have numerous or complicated financial transactions.

Lastly, it can depend on where your business resides. If you operate in an area where the demand for bookkeepers is higher, you will probably end up paying extra.

An Accountant’s Role

Once the books have been completed for the period by the bookkeeper, the accountant then takes over. An accountant analyzes the data then uses it to make predictions and offer advice to the business owner.

Some common duties an accountant can tackle are:

  • Confirm the accuracy of the data
  • Examine the data
  • Create reports
  • Perform audits
  • Give advice and projections based on the data
  • Assist business owners with making financial decisions and explain the possible effects of those decisions.

The job of an accountant is to look at the big picture and help business owners understand the financial status of their company. An accountant should be able to help you understand what is going on with your finances and assist you in making the best decisions you can make for your company.

Accountants are capable of doing the bookkeeping duties, and while you may think hiring just an accountant to do everything seems like a good idea, that is not usually the case. It will cost a lot more to pay an accountant to do the books than it would a bookkeeper.

What qualifications should an Accountant possess?

Not all accountants have the same credentials. In order to become an accountant, a person must have at least a bachelor’s degree. However, there are other certifications, degrees, and licenses that an accountant can choose to earn.

Many accountants decide to become a certified public accountant (CPA), which requires more educational credits and an exam to be passed. This credential is very lucrative to many employers.

A CPA has more advanced knowledge, but you should always make sure any accountant you hire has specific knowledge pertaining to your business’s industry.

How much does an Accountant typically cost?

An accountant is typically paid a salary, unlike a bookkeeper who is usually paid hourly. The U.S. Bureau of Labor Statistics states that the median pay in 2020 for an accountant was $73,560 per year (or $35.37/hour). The amount it will cost to hire an accountant will vary though based on their experience and the tasks you need them to handle.

When does a business need a financial professional?

The best time to hire a bookkeeper depends on your type of business and your level of comfort. A very small business may not require a bookkeeper at all, if the business owner has the time and skills to complete the tasks themselves. A larger business owner would most likely not have the time nor ability to keep track of all their business’s financial records.

Once you decide to look for a bookkeeper, you will have to choose whether to hire an individual or a bookkeeping service, and how often you want them to complete the tasks you require. You should seek recommendations from fellow business owners and online reviews to find the right bookkeeper for you, or even the American Institute of Certified Public Accounts if you need a CPA. Since bookkeepers are not required to earn a degree or license, you will need to do your homework and research the best candidate for your company.

If you find yourself struggling to decide if it is time to hire – here are three signs your business needs a financial professional:

Your business is booming! If your business is growing, so are the financial transactions taking place. You can always start small and hire a bookkeeper part-time and adjust as needed.

There’s no time. If you are struggling to complete all your tasks as a business owner and then do the job of a bookkeeper on top of it, you probably are running out of steam. As a business owner your time is important and should be spent on things other than tracking every financial transaction that occurs each day. Hiring a bookkeeper so you can focus on the more important aspects of the business may even save you money in the long run.

Tax-time woes. If you find yourself struggling at tax time you might be losing out on important deductions. Hiring an accountant to be sure your taxes are done thoroughly and accurately can save you time and from paying possible tax penalties.

Hiring a bookkeeper or an accountant, or both, is a decision that does not have to be daunting. Do your research, decide exactly what you want and if you change your mind, you can pivot and hire someone else or additional help.

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