Accountants and bookkeepers are essential for all businesses, including small businesses. In this blog post, we will take a look at bookkeeper vs accountant and understand their roles. This will help you decide who should you hire if you are a small business.

Some people think the two roles are interchangeable, but there is a clear distinction between them. Let’s unpack!

Bookkeeping vs Accounting

Bookkeeping is the process of recording and organizing financial transactions to track income and expenses and prepare financial statements. The accounting function, on the other hand, enables businesses to understand their financial performance, make informed business decisions, and comply with tax laws.

So, a bookkeeper typically performs the following tasks:

  • Data entry and recording of financial transactions, including sales, purchases, and expenses.
  • Invoice processing.
  • Reconciling bank and credit card statements.
  • Payroll processing.
  • Preparing financial statements like income statements, expense statements, and balance sheets.

And the accountant typically is responsible for these tasks:

  • Tax preparation and return filing.
  • Running financial reviews and audits.
  • Extending financial advice and consultation.
  • Formulating and implementing financial management systems.

Significance of Bookkeepers and Accountants in Small Business

The bookkeeping process is the elementary step to accounting. Both bookkeepers and accountants play a collaborative role in the success of small business. They together help track, record, analyze, and report financial data to enable business owners and management to:

  • Monitor business’s financial health.
  • Level up cash flow management.
  • Make data-driven business decisions.
  • Minimize the risk of errors and fraud.
  • Improve regulatory and tax compliance.
  • Save money, labor, and time.

Bookkeeper vs Accountant: Who Should You Hire If You Are a Small Business?

Every small business is different in nature, size, and complexity. You should hire a bookkeeper or accountant in keeping with the needs and complexity of your business and your own financial expertise.

Consider hiring a bookkeeper or an accountant based on your financial knowledge and skills and the complexity of your business.

If you have a micro or small business with simple finances, you might be able to handle bookkeeping tasks yourself if you are skilled.  As your business expands, it becomes critical to hire a professional bookkeeper or accountant who is suitably skilled.

But who should you hire? Let’s dive into bookkeeper vs accountant riddle!

Factors to Consider When Choosing Between a Bookkeeper and an Accountant

What level of expertise and skills are sufficient for a small business? The bookkeeper vs accountant debate stems from this. The choice becomes easier when you keep the following factors in mind:

  • Complexity of your small business: If you have a small business with complex financial operations, you will likely need to hire an accountant. Qualified accountants have training to handle complex accounting tasks, such as financial analysis, tax preparation, and financial auditing and review.
  • Your own financial expertise: If financial management is not your strong suit as a small business owner, you should hire an in-house or outsourced bookkeeping or accounting expert. A skilled bookkeeper or accountant helps you to set up and maintain a sound accounting system, track your income and expenses, and prepare financial statements.
  • Your budget: Hiring a bookkeeper or accountant may seem an undesirable expense, but it helps time, trouble and money in the long run. You can make better business decisions and stay clear of costly mistakes with accurate tracking and reporting of your financial data by them.

Signs You Need a Professional Bookkeeper or Accountant

Here are six signs that you may need to hire a professional bookkeeper or accountant:

  1. You are spending too much time on bookkeeping tasks.
  2. You are not sure how to accurately track your income and expenses.
  3. You are struggling to prepare financial statements.
  4. You are having trouble complying with tax laws.
  5. You are making careless mistakes in your financial records.
  6. You need help making informed business decisions.

It will be a good idea to hire a skilled bookkeeping or accounting service or professional if you are experiencing any of these issues. They can help you to get your finances on track and save you time and money in the long run.

Signs You Need to Outsource Your Accountant or Bookkeeper

All the signs mentioned above are also good reasons to hire an outsourced bookkeeping or accounting service. Outsourcing your accounting process can offer numerous advantages over in-house handling.

Here are 12 typical signals when your small business needs to outsource a bookkeeper or accountant:

  1. You are facing difficulty hiring expert accountants and bookkeepers. (Skills and wage issues)
  2. You want to free up your people, resources, and time to focus on other aspects of your business.
  3. Your internal accounting system is not up to par for lack of up-to-date skills and technologies.
  4. You are looking for specialized skills that are not available in-house.
  5. You need extra help during tax season, for a specific project, or scale up.
  6. You are not confident about accuracy and timeliness of your financial records.
  7. You want to restructure your accounting or bookkeeping function with selective outsourcing.
  8. Your business is growing fast, and your accounting workloads are increasing or fluctuating as a result.
  9. You have concerns about employee fraud.
  10. You want to save costs without sacrificing productivity and quality of the accounting/bookkeeping process.
  11. You want to access latest accounting technologies and platforms without investing in in-house infrastructure.
  12. You prefer to outsource anyway. It could be end-to-end or selective accounting outsourcing.

Aligning the Two Roles for Small Business Success

The roles of bookkeepers and accountants are complementary, serving as the yin and yang of financial management. For small businesses, the decision to hire a bookkeeper or accountant often hinges on the size and complexity of the business.

For those with straightforward financial operations, simple bookkeeping may be feasible.

However, as your small business enters a growth phase or you have complex financial tasks, you might need to hire both bookkeeper and accountant, or someone who can fulfill both roles. Moreover, aligning both roles also becomes increasingly valuable.

Conclusion

Generally, both bookkeeping and accounting are critical for small businesses. So, the question of bookkeeper vs accountant more often than not doesn’t hold up. For the established small businesses, especially!

Small business bookkeepers carefully track financial transactions, ensuring accurate and timely updating of financial records. Accountants assist businesses in interpreting and analyzing their financial data to make informed business decisions. Thus, bookkeeping serves as a foundation for accounting.

Whether to hire a bookkeeper or an accountant depends on your business’s specific needs. You may be able to manage without a bookkeeper or accountant if you are a small business with relatively straightforward financial needs.

However, if your business has complex financial requirements or you are uncomfortable managing your finances independently, consider hiring an expert. Bookkeeping outsourcing services and accounting outsourcing services are also viable options.

If you are uncertain whether you require a bookkeeper or an accountant, consult an accounting expert. Outsourcing your bookkeeping and accounting can be advantageous if you seek to reduce costs and the hassle of managing an in-house process.

To learn more about available services, contact a reputable outsourced bookkeeping and accounting services provider for information, guidance and pricing.

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