You could understandably be confused about why, in the corporate world, the two separate words ‘accountant’ and ‘bookkeeper’ often pop up — especially as they can often appear to be used as synonyms for each other.
However, it is important to emphasise that an accountant and a bookkeeper are not strictly the same thing — even if there is a certain degree of overlap in their responsibilities. This begs the question of how accounting and bookkeeping fundamentally differ.
“Bookkeeping is designed to generate data about the activities of an organisation,” D’Arcy Becker — an accounting professor at the University of Wisconsin-Whitewater — explains to Business News Daily, adding: “Accounting is designed to turn data into information.”
If you run a business, you might be tempted to try handling your company’s bookkeeping and accounting duties yourself — or at least delegating them to a small number of your current employees.
However, given that your company’s growth can come to depend on multiple revenue sources, you could find that in-house staff struggle to keep track of them all. This would underline the case for you outsourcing those accounting and bookkeeping responsibilities to a third party.
It also helps to explain why, ideally, you ought to make this move sooner rather than later. One problem with initially taking the hands-on approach is the friction that would result when you inevitably need to start offloading this work at a later point.
What Is A Bookkeeper?
The term ‘bookkeeping’ can be seen as literal in meaning, as it very much involves keeping books — or records, if you will — of the money going out of your business as well as its financial takings.
To put a long story short, then, a bookkeeper not only directly records all purchases, payments, and sales a company makes, but also retains the documentation that results from this.
Selected examples of tasks a bookkeeper typically undertakes include:
- Producing invoices
- Inputting sales receipts
- Managing the payroll
- Submitting VAT returns
A bookkeeper therefore has to handle lots of numbers — and those from sales and expense receipts will go into a document known as a general ledger.
This ledger can be something as simple as a sheet of paper or as sophisticated as specialised bookkeeping software — like Intuit QuickBooks. ST Accountancy holds Advanced Certified ProAdvisor Online status for QuickBooks, confirming our expertise in utilising it for our clients.
Although bookkeeping is primarily an administrative job at heart, a good bookkeeper will also be able to advise you on what you can do to make their work easier. For example, you could learn how to gather and store any paperwork they require.
What Is An Accountant?
Once you have records of what money is going into and out of your business and when, an accountant can interpret what this data says about your company’s financial state.
The accountant can subsequently, on the basis of this data, suggest strategies that your business could follow in order to not only build on its previous success, but also plug gaps in the current financial picture.
Let’s assume that the accountant finds you rely too heavily on one specific type of revenue stream. They could put forward ideas for other routes that they believe would warrant your consideration. You could then work on adding to your revenue sources and making them more varied.
The objective here would be to better protect your business against economic shocks in certain sections of the market. A retail firm that opens outlets in overseas territories, for example, will be able to limit the inconvenience to itself if its home market starts failing to bear as much fruit as it once did.
An accountant’s responsibilities can be broken down as thus:
- Analysing bookkeeping records
- Generating reports on this data
- Guarding against legal risks to the business
- Advocating steps for the company to take next
A relatively small, little-established business might initially attempt to get by with only a bookkeeper — rather than an accountant as well — in a bid to save money.
However, as a result of drawing upon a certified accountant’s assistance at an early stage, you can more easily iron out troughs in your commercial growth journey.
Do I Need An Accountant Or Bookkeeper?
As your company begins to amass more customers or clients, you will naturally want to capitalise on this growth — such as by forming ties with more suppliers so that you can expand the range of products or services you offer.
Of course, you will also need people to do the work of providing those products or services in your company’s name — hence why you might want to start recruiting more staff.
These moves will collectively see more and more financial transactions — such as purchases, sales, and payments — being made via your business. In order to closely monitor your company’s monetary health, you should record all of these transactions.
This is where the importance of bookkeeping comes in. You need someone who can keep your financial data accurate and up to date. Otherwise, you would risk making decisions your company struggles to financially stomach.
This risk can be even greater if you neglect to use the services of an accountant. A certified one will be well-positioned to point out financial opportunities that you may have overlooked or failed to identify at all.
In practice, then, having an accountant or bookkeeper at close hand can make the difference between your business thriving or simply getting by — or even running out of money altogether.
Can An Accountant Do Your Bookkeeping?
The term ‘accountant’ has a broader meaning than that of ‘bookkeeper’ — so much so that it is perfectly possible for an accountant to take on bookkeeping duties. Conversely, a bookkeeper should not be classed as an accountant unless they are certified as such.
This goes some way towards clarifying why confusion can often surround what ultimately distinguishes a bookkeeper from an accountant. An accountant’s remit is wide enough to cover general accounting and bookkeeping, as well as resolving taxation issues and preparing annual returns.
At the opposite end of the scale, an entry-level bookkeeper should not be handed accounting duties. As a finance professional specialising in bookkeeping is not trained as rigorously as an accountant, the former will have many gaps in their accounting skillset compared to the latter.
It would therefore pay for you to be selective about which finance professionals you turn to for help. A bookkeeper does not need to be as highly qualified as someone running the full gamut of accountancy solutions — from completing tax returns to signing off accounts.
While certain bookkeepers you come across may hold a specific bookkeeping qualification but not any accounting-related equivalent, it would bode well for you to find an accountant licensed by a relevant, respected qualifying body like the Association of Accounting Technicians (AAT).
Bookkeeper VS Accountant: The Importance
It can be hard to assess whether a bookkeeper or an accountant has the more important role. As we have acknowledged, an accountant can potentially handle more responsibilities than a bookkeeper — and the latter’s job might appear to entail little more than noting and recording numbers.
However, the part this work plays in a company’s financial resilience should not be underestimated. You have to remember that, without the kind of accurate data that a bookkeeper would be able to provide, an accountant can be left with a misleading picture of how the given business is performing.
As a result, an accountant could be misled as to where, financially, your company is firing on all cylinders and where it is actually falling behind. When an accountant works with hurriedly thrown-together data, they could too easily end up providing you with faulty, ill-informed advice.
On the flip-side, though, no matter how accurate your bookkeeper’s records are, you could be severely curtailed in what conclusions you are able to draw from them if you lack an accountant. After all, they are trained in making sense of those figures and judging what they really mean for the business.
While a bookkeeper is analogous to a repair technician inspecting the technical nitty-gritty of a computer to see how well it is functioning, an accountant is more akin to an IT teacher who, in clear, easy-to-understand terms, can advise you on how to make the best use of that computer.
How ST Accountancy Can Help You
Our bookkeeping services for Ipswich businesses are a strong testament to the duality of accounting work. If your SME is based in the Suffolk county town or further afield within the county itself, we can give you ready access to a bookkeeper who doubles as an accountant.
This would be a great-value alternative to you building your own in-house accountancy team. You can also rid yourself of the need for separate bookkeeping and accountancy workers, and thus the possibility of miscommunication between the two.
We put reliability, efficiency, and accuracy at the forefront with all of our bookkeeping solutions. There are a a range of accountancy firms in Suffolk, but we can help you beyond accountant management with additional services such as payroll services in Suffolk or small business advice. To get in touch with our Ipswich-based team for further (and jargon-free) guidance about what we could do for you, please give us a ring on 01473 561035 or email [email protected].