Bookkeeping vs accounting
If bookkeepers and accountants are both responsible for dealing with your business’s finances, do you need to have both on your team? The simple answer is yes, you definitely need both. While bookkeeping vs accounting may seem like the same profession because they both deal with financial data and require basic accounting knowledge, these two roles have distinct responsibilities and fill specific needs for your business. Let’s take a look at the difference between these two essential roles and how they work together.
What does a bookkeeper do?
A bookkeeper is responsible for recording the day-to-day financial transactions of your business. Their tasks are very mechanical, as they involve entering calculations and maintaining records, but they do not require any analysis. Financial statements are not prepared as part of the bookkeeping process. (Although their job is fairly straightforward, you may still find it tricky to hire the perfect person. Be sure to read our blog on the top five questions to ask when hiring a bookkeeper for tips.)
What does an accountant do?
An accountant is responsible for interpreting, classifying, analyzing, reporting, and summarizing financial data – they look at the big picture for your business. After a bookkeeper enters financial transactions, an accountant is then responsible for taking these numbers and telling their story through financial statements and reports.
Why do you need both a bookkeeper and an accountant?
When a bookkeeper records your business’s financial transactions, this is a historic account of your company’s finances. To make this account useful to your ongoing business development, however, you need an accountant to provide an analysis of the data. Data is important, but until you turn it into information, it’s difficult to properly use it to make smart business decisions.
For example, if a bookkeeper’s records show that your gross profits are suddenly down, an accountant can help you determine why this has happened: Did something change in your business? Was there a fundamental change in your cost base? Are certain product lines not doing well? Without this crucial analysis, it’s impossible to decide what changes and improvements you need to make to your business moving forward.
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