Many small businesses know that they need someone to take care of their finances. Yet, understandably so, not all know the difference between bookkeeping and accounting. Here is more on what the differences are and why your small business needs an accountant.
What’s the Difference?
Before we look at how they’re different, keep in mind that both work with your business to support you in your finances. Let’s take a look at what each does and how that affects your business.
What Does a Bookkeeper Do?
A bookkeeper records financial transactions. They work in a more administrative capacity and give you a look into business insights.
A bookkeeper typically has a general ledger. And they make adjustments on things like:
- Debits and credits
- Recording financial transactions
- Balancing the account
- Handles customer payments
What Does an Accountant Do?
An accountant focuses more on the overall picture. For instance, they perform key functions such as:
- Taking care of tax matters (returns, audits, etc)
- Preparing financial statements for the business
- Helping the owner understand financial decisions and their impact
- Examining the cost of operations
- Work with you to set financial goals
- Provide tax savings strategies
A simple way of seeing the difference is noted by Business News Daily:
“Bookkeeping is designed to generate data about the activities of an organization,” said D’Arcy Becker, chair and professor of accounting at the University of Wisconsin Whitewater Department of Accounting. “Accounting is designed to turn data into information.”
Why Does Your Small Business Need an Accountant?
An accountant is well-versed in the latest laws and regulations. This includes important matters like your taxes. Since accounting and bookkeeping are specialized fields, why place your company’s finances in the hands of someone who isn’t trained in accounting services?
For example, let’s say you have a bookkeeper on staff. That’s all well and good yet when it comes to taxes, this is a complex area where knowing all of the laws is paramount. Your bookkeeper is not trained in this and doesn’t have the certification that an accountant is required to have.
This doesn’t mean that your bookkeeper will ruin your business. However, many small companies engage in tax risks and behavior that is out of a bookkeeper’s area of expertise.
If that’s not enough to convince you, here are a few specific reasons why your small business needs the help of an accountant:
- Year-end reporting
- Managing cash flow
- Maximize business potential
- Track your numbers
- Meet deadlines
- Managing growth
- Handling audits
- Staying up to date with local regulations, tax rules, state and federal laws that relate to your day-to-day operations
An accountant can advise you on growth strategies, analyze your data, provide business trends, and submit forecast information.
None of this means that your bookkeeper isn’t an important part of your business. It’s just that both perform different functions. You wouldn’t hire your security guard to handle the warehouse because each has a different job. It’s the same with a bookkeeper and an accountant – each has an important function in small business matters.
We Can Help
At Prime Accounting Solutions, we have the expertise and knowledge to allow you to focus on running your business while we handle your bookkeeper and accounting. We are fully trained bookkeepers, and licensed tax preparers. If you’re ready to see how an accountant or bookkeeper helps your business grow and prosper, contact us so we can help.