Does Your Business Need an Accountant or Bookkeeper?
As a startup business grows into a small business, it is common for the accounting duties to overwhelm the business owner. This is generally the time that a search begins for some help. But does your business need a bookkeeper or an accountant? While some job tasks may overlap the two jobs are defined differently.
What is a Bookkeeper?
A bookkeeper handles the mechanical functions of maintaining accounting records. They follow a regimented monthly schedule and enter all transactions into subsidiary ledgers. These functions are broken down into accounts receivable, accounts payable and payroll in larger companies. It would be ideal to have each function separated between employees for security reasons. However, for smaller companies one bookkeeper might perform all of these functions. A person who does all of the bookkeeping as well as preparing the monthly financial statements is called a full charge bookkeeper.
What is an Accountant?
Accountants are less involved in the day to day tasks of entering transactions but take a higher level look at the business. They compile the subsidiary ledgers into the general ledgers. They design and prepare reports that are useful in helping managers make informed decisions about the business. An accountant can do all the work of the bookkeeper but they normally delegate these tasks off to lower paid employees.
Who does the Tax Preparation?
While many accountants offer tax preparation services, it has developed into its own specialty. There are people that do tax preparation but are neither bookkeepers nor accountants. The person that does the tax work for your business should be left to someone who specializes in this work because there are so many new laws that go into effect each year.
A Hybrid Approach
Most small businesses can't afford to add on an accountant to do the work of a bookkeeper. But unless the owner is familiar with accounting they are not able to perform the tasks of an accountant themselves. A good approach is the hybrid of both. The company will hire a bookkeeper for day to day tasks and then outsource the accounting work to an accounting firm. They may be CPAs or just experienced in small businesses. The accounting firm performs the monthly reconciliations and audits the books for errors or fraud.
The most important thing for any business is to make sure the work is done. A business that does not maintain good accounting records is doomed to make uniformed decisions or miss opportunity to improve their bottom line. They can also prevent unwelcome trouble from state and federal tax authorities.