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The terms Bookkeeping and Accounting are often used interchangeably. While both deal with the finances of small and mid-sized businesses, they both have very different meanings and provide contrasting financial information. We’re breaking down the key differences between the two, so you have a better understanding of what they mean and how they fit into your business.
Job Responsibilities according to the Bureau of Labor Statistics
Bookkeepers:
- Use bookkeeping software, spreadsheets, and databases
- Post financial transactions
- Receive and record cash, checks, and vouchers
- Put costs (debits) and income (credits) into the software
- Produce reports, like balance sheets, income statements, and totals by account
Accountants:
- Examine financial statements to ensure accuracy
- Organize, analyze, and maintain financial records
- Assess financial operations, identify risks and challenges, and make best-practices recommendations to management
- Strategize on ways to reduce costs, enhance revenues, and improve profits
The main difference here is strategy. At TGG, our accountants are focused on growing your business and most importantly, helping you achieve your personal and professional goals. In general, accountants are more proactive in helping you boost the cash flow of your business while bookkeepers are more reactive and focused on accurately recording transactions.
Where They Overlap
The work of an accountant will overlap with the job responsibilities of a bookkeeper. A bookkeeper is recording the transactions so it’s up to the accountant to review the information and interpret it to make key decisions that will benefit the business. Therefore, it is so important that transactions are entered correctly so key decisions can be made based off accurate information.
Education & Credentials
Bookkeepers are not required to have any formal education or degree. Most bookkeeping qualifications are at a diploma or certificate level.
Accountants must have a degree in Accounting or Finance to call themselves an Accountant. Accountants can also pursue Certified Public Accountant (CPA) and or Certified Management Accountant (CMA) licenses.
Taxes
A bookkeeper may pay your taxes for you, but they do not give tax advice or communicate with the IRS.
Accountants prepare detailed financial statements, perform audits, and may prepare reports for tax purposes, but an accountant has no standing with the IRS. Only CPAs, tax attorneys, and “Enrolled Agents” represent a taxpayer in audits and investigations with the IRS.
Hire a Bookkeeper or an Accountant?
The answer to this question is that it depends on the needs of your business and how you plan to grow and scale. Keep in mind, that the more you grow, the more accounting support you will need to manage the increase in the number of transactions. One thing that’s certain, is that you need to have oversight of your accounting department in order to significantly decrease or completely eliminate your risk of fraud. According to the Association of Certified Fraud Examiners report the average size of the fraud was $200,000 per occurrence for businesses with fewer than 100 employees.
Summary
Compared to accounting, bookkeeping is more transactional and administrative, with a strong focus on recording financial transactions. Accounting is more subjective, giving you insights into your business’s financial health based on bookkeeping information.
How We Can Help
TGG is a leading provider of outsourced accounting and business advisory services for small to mid-size businesses across industries. Our mission is to improve business owners’ lives through excellent financial management. As a fully scalable accounting and finance consulting team, we work as a natural extension of our client’s business, tailoring our services to fit their specific needs. TGG provides timely, actionable information to management teams through detailed measurement, reporting and analysis of financial metrics and results. By managing through numbers and metrics, companies are able to maximize income, understand their cash position, and improve visibility into the future performance of the business.
Other Resources:
Sources:
- https://www.bls.gov/ooh/office-and-administrative-support/mobile/bookkeeping-accounting-and-auditing-clerks.htm
- https://tgg-accounting.com/how-to-eliminate-fraud-in-your-business/
- https://www.acfe.com/report-to-the-nations/2020/
- https://tgg-accounting.com/our-services/outsourced-accounting/
- https://tgg-accounting.com/our-services/finance-consulting/
This post was reviewed by our team of accounting and financial experts. TGG’s mission is to make business owners’ lives better through excellent financial management. We strive to provide the most up-to-date and objective information on accounting-related topics so our readers can make informed decisions based on factual content. All posts undergo a review process with at least one member of our Leadership Team to ensure accuracy.
This post contains trusted sources. All references are hyperlinked at the end of the article to take readers directly to the source.
Matt Garrett is the Founder and Chief Executive Officer of TGG. He is a regular speaker across the country on behalf of Vistage educating business owners on the need for sound financial practices, and is Vice President of the Board of Directors of FINACA. Under Matt’s leadership, TGG has received the following recognition: INC. 5000 top companies in the U.S. five years in a row; one of “San Diego’s Fastest Growing Companies” the past four years; and is among San Diego’s “Best Places to Work.”
