When it comes to keeping on top of transactions and financial data for businesses of all sizes, accounting services are often at the forefront of options available. But with many company owners confusing the key differences between accountants and bookkeepers, it’s not unheard of for the latter to be hired when the former might be better suited to the task.
On one hand, a bookkeeper will offer a more personal level of service – as their main responsibility will be to focus on repetitive business sales and transactions in general. It is their job to categorise transactions into drawings, business expensive and gross income, before aiding with self-assessment tax returns and other similar financial related activities.
As a result, bookkeepers are often better suited to dealing with individuals such as sole traders and the self-employed. But don’t accountants offer the same types of services in general and couldn’t one provider be substituted for another? Here’s a closer look at a few of the key differences between the two roles.
The differences and similarities between accountants and bookkeepers
In a general sense, both of the aforementioned service providers offer a similar range of services – that is that they offer financial solutions to individuals and companies in need. But the key difference is that a bookkeeper will usually focus on the summation of a financial process. What this means is that instead of identifying the individual details of a transaction, the role of a bookkeeper will often be to collate information into a neat, organised system – hence the term ‘keeper of books’.
On the other hand an accountant will often need to be utilised before a bookkeeper, in the sense that it will be their job to correctly ‘account’ for every single transaction that comes into a business and subsequently, out of it. This means that where a bookkeeper might see a payment of $1,000 made from a company to an external agency, they will try to identify whether this payment comes under a business expense or some type of general drawing for tax purposes.
If an accountant sees that the money has come out and been sent to a third party, it is their main responsibility to identify the cause of the transaction; before forwarding it to a bookkeeping department if one is present. And if one isn’t, then the transaction will simply be marked as a transfer until it comes time to file a tax return.
So, which service provider is more important?
There’s no real answer to that question, as both types of financial expert bring their own selection of skills to the table. For businesses of any size, an accountant should be able to manage and maintain all forms of transaction that come in and out of a company. When it comes to filing a tax return, taking care of a payroll, or managing assets – an accountant can help with this as well.
Bookkeepers will often specialise in filing tax data, categorising expenses, profits and other sources of financial information, before preparing them for the tax year ahead. As both experts usually undergo the same types of training, we can’t think of a single reason why you wouldn’t want to hire either – in fact, as long as you are clear with your requirements and define what your agency or business needs from their accounting specialist, they should be able to help.
So, in summary, accountants are tasked with managing and maintaining financial transactions, whereas bookkeepers are generally required to monitor and organise financial data for taxation purposes, or to aid with reducing tax by identifying eligible business expenses.