Bookkeeping and accounting - do the two terms sound synonymous to you?
Do you often use the two of them interchangeably?
That remains a hot topic of discussion among businesses because there’s often a lot of confusion about it. Sometimes understanding the difference between the two can be tricky. For example, both bookkeepers and accountants work with your books of accounts. Still, there are some differences that every business owner needs to be aware of before deciding which one to hire.
Some of the questions that could be in your mind while hiring a bookkeeper could be;
How to know if my business needs an accountant or a bookkeeper?
Do I need one permanently, or can I hire them on contract?
Do I hire a virtual bookkeeper or an in-house one?
Do I only need a bookkeeper if I own a small-sized business?
This blog will help you understand the two roles in detail to help you choose the ideal fit for your business.
What does a Bookkeeper do?
Let us first understand the role and responsibilities of a bookkeeper. A bookkeeper is responsible for recording day-to-day financial transactions, updating a general ledger, and preparing trial balances for perusal by accountants.
They also maintain requisite documents for taxation compliance, monitor cash flow, and assist in preparing financial reports, which helps management make strategic decisions. Here are the most common responsibilities of a bookkeeper:
- Maintaining a balanced general ledger
- Preparing trial balance for the accountants
- Monitoring the variances from the projected budget
- Establishing different accounts
- Maintaining records of financial transactions
- Assist in the preparation of the financial reports by collecting, analyzing, and summarizing accounting information
- Developing a system to account for financial transactions by establishing a chart of accounts
There may be additional responsibilities based on the unique needs of your business. For example, a bookkeeper may be required to learn a specific accounting software system.
What does an Accountant do?
In contrast to a bookkeeper, an accountant may have to crunch the numbers given by the bookkeeper, but these are only a part of their skill set. It is vital to possess sharp logic skills and big-picture problem-solving abilities. In addition, accountants must use the small pieces of information put in place by the bookkeeper to draw much more significant and broader conclusions. Here are the most common responsibilities of an accountant:
- Preparing Income tax returns
- Conducting reviews of various financial statements
- Performing accounts analysis
- Conducting routine audits to ensure that the financial statements follow ethical standards.
- Preparing forecasts and what-if analysis
- Monitoring indirect taxation and preparation of returns
- Assessing financial risks associated with contracts
- Helping make business decisions like carving out provisions and reserves.
Who is the right fit for my business?
Now that we are clear on the roles of the bookkeeper and accountant let us return to our original question: who to hire.
The answer is that you need to hire a bookkeeper and an accountant for your business. Let us discuss this in the context of the size and type of your business:
- If yours is a small business with a lower transaction volume: You should have both roles part-time. A regular bookkeeper can spend a few hours per week managing the transaction entries and ensuring that documentation is in place. You can hire an accountant for specific needs like audits and tax filing.
- If your transaction volume is higher, you may need a full-time bookkeeper (one or more bookkeepers). Accountants can be hired on a retainer basis.
- For larger businesses and enterprises, the transaction volume and complexity are higher. As a result, you need a team of bookkeepers and accountants to manage your accounts.
I am also often asked: Could we just have an accountant do the bookkeeping tasks? Well, that is not likely to be an optimal solution. Accountants are a lot more expensive. The bookkeeping hours required are much more than those required to file taxes or other accounting activities. It will escalate costs without delivering incremental benefits.
Further bookkeeping can be done remotely from offshore locations to drive down costs further. Virtual bookkeeping is an efficient, cost-saving solution for modern businesses that want to improve their operations without burning a hole in their budget. With virtual bookkeeping services like Wishup, you can get the quality of a full-time bookkeeper at only a fraction of the price.
Make the smart choice for your business
In conclusion, I would say that both of these roles are critical and judicious. Using a bookkeeper helps you bring efficiency to operations, increase accuracy in accounting and drive down your costs.
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