Though many small businesses use the terms “accountant” and “bookkeeper” interchangeably, these professionals actually provide very different yet complementary services. Bookkeeping refers to the process of recording, storing and retrieving financial transactions, while accounting refers to the systematic process of classifying, analyzing, summarizing, interpreting and reporting financial data. Working in tandem, these positions can help lend great clarity to the business decision making process.
To start, accountants and bookkeepers are involved at different stages of the financial cycle, with a bookkeeper tending to stick to the day-to-day processes and an accountant serving a more distinct role at reporting, tax filing, and analyses periods. Let’s take a closer look at the functions of an accountant and those of a bookkeeper to have a clearer understanding of what each professional can do for your business.
Functions of a Bookkeeper
Bookkeeping takes place at the earlier stages of the financial cycle. A bookkeeper’s job is to manage and log the daily financial transactions of a business, which include sales, payments, purchases and receipts. However, a bookkeeper can also be responsible for other tasks, such as completing payroll and monitoring accounts receivables and working with controllers to complete monthly financial closings.
The role of a bookkeeper is often dependent on the size of the business and the number of transactions the company makes daily. A bookkeeper’s responsibilities are likely to expand as a business grows and as the company’s financials get more complex. However, a bookkeeper can often be mistakenly labeled as a controller as a small business scales. It should be noted that a controller is a trained professional with other distinct responsibilities that also complement the bookkeeping function.
Enterprise-level bookkeeping software is able to generate the reports or complete financial documents that previously fell under the duties of an accountant. This merging of the two professions means a business that doesn’t have complicated financials can manage with using bookkeeping services most of the time and only hire an accountant when it’s time to prepare taxes or audits.
Functions of an Accountant vs. a Controller
Accounting deals with interpreting the data created by proper bookkeeping. The primary functions of an accountant include analyzing financial statements, completing income tax returns, and helping business owners understand all the tax and financial regulations that apply to their company.
Controllers also help business owners have a better understanding of their business’s financial health. Controllers turn a bookkeeper’s data into various financial reports that detail the company’s financial standing, including its profitability and cash flow. Business owners also rely on their controllers for financial forecasting as well as budgeting and analysis.
Which Financial Professional Is Best for Your Business?
The decision to use an accountant, bookkeeper or both is determined by the size of your company, the complexity of your operations and financials, and the demands of your industry. While the two services complement each other, only the largest companies with many daily and complicated financials are likely to need the regular services of a bookkeeper, controller, and a CPA.
If you’re leveraging outsourced bookkeeping services to fill your bookkeeping and controllership needs, requirements for your accountant may be limited. A small business or a new business may simply not need the more advanced service accountants provide. Hiring an accountant when it is time to file taxes or generate end-of-the-year financial reports may be all the accounting help your business needs.
Ultimately you should choose the option that is most likely to yield accurate financial results, as these will help you to make informed business decisions and secure the long-term success of your company. Although you can choose to manage your financials on your own, hiring professionals for this job will allow you to focus more on managing and growing your business.