David Letterman once said, “There’s no business like show business, but there are several businesses like accounting.” And one of those several businesses is bookkeeping. So, what’s the big difference between accounting and bookkeeping, anyway?
The good folks at Bench provide a solid starting point by breaking down the tasks of bookkeepers and accountants into the following categories:
- Bookkeepers “record financial transactions; post debits and credits; produce invoices; maintain and balance subsidiaries, general ledgers, and historical accounts; and complete payroll.”
- Accountants “prepare adjusting entries (recording expenses that have occurred but aren’t yet recorded in the bookkeeping process); prepare company financial statements; analyze costs of operations; complete income tax returns; aid the business owner in understanding the impact of financial decisions.”
To oversimplify the difference—bookkeepers enter data, and accountants (who may also enter data) also provide analysis, tax returns, and other high-level duties. An accountant will often utilize the data provided by the bookkeeper to provide financial reporting and outlooks for a company. As Katie Bunschoten explains on the Intuit Small Business Blog, “Many bookkeepers get their start acting as a data-entry clerk or entry-level bookkeeper for a business and grow, through experience and merit, into being a go-to person for the day-to-day financial recording. […] An accountant may also focus on reporting, business analysis and processes, and possibly advice.”
While these differences may seem minor, they’re important for you to know as a small business owner. Bookkeepers and accountants function similarly, but noting the differences will allow you to ensure that you’re getting the most out of their respective knowledge and expertise. Additionally, recent advancements and efficiencies in accounting and bookkeeping software has allowed for increased crossover between the two areas, which enables accounting professionals to be responsive and adaptable to various demands and expectations.
There are many accounting professionals active in the market that might describe themselves as accountants or bookkeepers, but are otherwise uncertified. While working with a non-certified financial professional might save you a few bucks, accounting is one of the areas you don’t want to skimp—especially because small businesses are far more prone to tax audits than individuals. When you’re working with an accountant, always go with a Certified Public Accountant (CPA), who is state certified after a rigorous round of testing and years of demonstrated experience. And when you’re working with a bookkeeper, look for those with either or all of the following: QuickBooks ProAdvisor certifications, professional certification through the American Institute of Professional Bookkeepers (AIPB), and/or certification and training through an established college or university.
While accounting isn’t always as singular or exciting as show business, no business can thrive without good accounting and balanced books.
(PS: If you like what you see here, be sure to subscribe to my newsletter for more tips and advice to help your small business grow.)