Key Differences Between Bookkeeping and Accounting

While hiring a new person to come and handle the finances at your company, you may be wondering what the differences are between accounting and bookkeeping. They are both financial professionals, right? 

Accountants must have taken a series of accredited qualifications, while bookkeepers are not held to any national standard. This means that a bookkeeper might be the right choice as they will be much more affordable! A bookkeeper is also handy if your management team is comfortable and happy forecasting and analyzing financial trends. Let’s take a look at the three key differences between the two professions before you decide to hire a bookkeeper. 

Education and qualification

All accountants are also bookkeepers, but bookkeepers are not always accountants. Bookkeeping can be thought of as the first level of accountancy, so all registered and chartered accountants will have gone through the training to be able to work as bookkeepers, too. 

Mostly, bookkeepers report to accountants. The purpose of bookkeeping is taking information from source documents and recording it correctly, completing paperwork to show all incoming and outgoing money. Traditionally there were double and single-entry systems for this kind of work, and it would have been carried out in a series of leather-bound ledgers; today, it is much more common for bookkeepers to use Excel or specialist software like Quickbooks. 

Accountancy is a specialism that takes many years of college and further accreditation. This means that accountants are compensated for that time, and the time they have put into their work. Bookkeepers, on the other hand, do not legally need to be accredited or qualified in order to carry out their duties. 

The American Institute of Professional Bookkeepers (AIPB) and the National Association of Certified Public Bookkeepers (NACPB) both offer a form of licensing and accreditation in the work of bookkeeping, and while they are not necessary it can be a positive to know that your professional has gone through a set of frameworks to become well-versed in their job. 

Purpose

Bookkeeping is all about organization. These professionals spend their workdays recording financial information, managing money, and filing source documents into a suitable organizational system. They may be full-time or part-time, depending upon the size of your business and the number of employees, clients and customers, and suppliers. A great bookkeeper who understands the business and industry may only need to work one or two days to keep on top of all their duties. 

An accountant’s role is to analyze the data in front of them. They must be able to read the documents and financial reports that are produced by a bookkeeper, and plan what they think will happen in the future. They have the responsibility to ensure the company is following industry standards and government mandates. 

Accountancy requires a deep, detailed understanding of all the legalities of the business and the financial responsibilities. It also needs to be carried out by someone who can read and understand multiple different forms of financial reporting at once and come up with a plan by forecasting and interpreting the information available on the public market. 

The purpose of bookkeeping is to record and store financial information, and the purpose of accountancy is to interpret that information and then make a plan for the future. Both skills are required for a healthy company, but there is a degree of need. Many business owners are comfortable interpreting information for themselves, or work with an accountant a couple of times a year. A bookkeeper should be more regular if you want to stay on top of your financial situation. 

Decision making

The crux of the difference between accountancy and bookkeeping is: who is responsible for making decisions? 

A bookkeeper’s role within any business is to record data. That is the scope of expectation. They must be organized and conscientious about keeping track of money, and they may be able to give you an idea of what your finances look like, but that’s the end of it. 

An accountant’s role is much more complex. They need to make sure that your company is following all standards that apply to it, and that tax codes and regulations have been followed consistently and to the letter. They are expected to use their qualifications, experience, and analytical skills to advise on financial matters. They should be able to make decisions about your company’s future, while a bookkeeper does not. 

Conclusion

There are several benefits of hiring a bookkeeper over an accountant: cost, keeping on top of regular recording, and availability. A bookkeeper will make your life easier, keeping source documents and financial reports up to date and accurate. 

Have a look for your next great bookkeeper today and let them take on the administrative duties of keeping your finances in order, so you can get on with the big picture stuff. 

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