Bookkeeping vs Accounting: What’s the Difference?
Are you finally considering hiring an extra hand or two to help you manage your business financials? But based on your business and your current needs you may be wondering, should I hire an accountant or should I hire a bookkeeper?
In this post, we’ll highlight the differences between bookkeeping and accounting and some key considerations to help you determine what is right for you and your business.
What is bookkeeping?
The definition of bookkeeping is the process of monitoring various day-to-day financial transactions for organizations or individuals. Bookkeeping responsibilities can range from a variety of simple to complex functions. Simple functions can include recording purchases, generating customer invoices, or managing payroll, whereas complex functions can be budgeting, cash flow projection, developing financial systems and software conversions.
If considering a bookkeeper make sure to look for specific accreditations offered through bookkeeping-specific organizations, such as the Certified Professional Bookkeepers of Canada (CPB Canada).
What is accounting?
Accounting is a high-level view of the financial health and position of the business. Although similar to bookkeeping, it is more subjective as accountants typically provide business owners with financial insights such as their financial position and cash flow based on the information collected and prepared from bookkeeping data. Typical responsibilities can include generating reports, performing audits and preparing financial documents such as tax returns, income statements and balance sheets. In addition, accounting can help with strategic planning, by augmenting the daily or weekly management reporting.
In terms of accountant certifications, there were three commonly accepted types in Canada. This includes the Chartered Accountant (CA), the Certified General Accountant (CGA) and the Certified Management Accountant (CMA). However, in recent years these designations have been amalgamated into one designation called the Chartered Professional Accountant (CPA).
Determining which is right for you
While bookkeepers and accountants each have their own roles and responsibilities, it’s not as simple as choosing one over the other. Ultimately, bookkeepers and accountants work together to provide an overall financial picture of the business and are both especially important if you are experiencing or plan to experience significant business growth.
No matter the business size, organizations may need accountants to prepare reports to measure their progress or other financial statements, which would require the operational tracking a bookkeeper provides. Bookkeepers get to know the business very well and can be a great source for discussion, advisory functions and financial planning.
A consideration to keep in mind is that bookkeepers typically work on a daily, monthly or weekly basis, which is a key component to building a financially viable business. Whereas an accountant generally steps in near the end of the year to help prepare financial statements and the tax return. Ultimately, having a good bookkeeper and a well-organized accounting system can help you stay on track throughout the year and reduce your accounting costs significantly.
A takeaway from KBBS
At the end of the day as your business grows, so will your bookkeeping and accounting duties. Hiring a professional is key in continuing your growth and allows you to focus on what’s truly important.
The goal of KBBS is to help you create and maintain a system that will enable you to make informed business decisions with confidence and ultimately thrive, grow and profit. Whether it’s helping you manage your everyday transactions or business taxes, KBBS has got you covered.
