Bookkeeper or Accountant? Which Do You Need?

Does a business need an accountant or a bookkeeper? And what’s the difference, anyway?

The definition of an accountant is “One that keeps, audits, and inspects the financial records of individuals or business concerns and prepares financial and tax reports”. A bookkeeper is “someone who records the transactions of a business”. Most businesses need the services of both, and they should work as a team.

An accountant (usually a CPA, or Certified Public Accountant) is the one who analyzes the financial statements, makes adjustments, prepares income tax returns, and provides strategic and planning assistance. They usually have at least a 4-year degree and have passed a rigorous certification exam. Because of their level of expertise and their professional liability, their hourly rates can be quite high.

A bookkeeper is the person who records the financial transactions of a business, reconciles accounts, and probably prepares monthly financial reports for management purposes. They may track accounts payable and receivable and manage payroll. While there are educational programs and private certification programs for bookkeepers, they are not required, and anybody can call themselves a bookkeeper. Bookkeepers usually charge less than accountants, but the well-qualified and experienced ones will command a higher fee.

A business would use a bookkeeper on a regular and ongoing basis to keep the books up to date. 

 Periodically (at least annually), these records will be taken to the accountant to review, finalize, and prepare the income tax return. If the accountant and the bookkeeper work as a team (meaning that they have had enough contact to be in agreement on how the books should be maintained), this process can go quite smoothly. A bookkeeper who knows how to work with your accountant can save money on the accountant’s fees by providing a set of books that does not need a lot of scrutiny and adjustment.

The line between the two duties can be fuzzy sometimes and different businesses may assign different responsibilities to each of the two roles. But generally, a bookkeeper does the day-to-day transaction recording and the accountant inspects the books from a tax and strategic standpoint and provides higher-level guidance to the business owner.

Do you need both? If you are in business, you should almost certainly seek the services of a good accountant. They can save you more in taxes than you will pay for their fees. If your business is very small, you may be able to handle the bookkeeping yourself. But if you have a lot of transactions, your business is has any complexity, or you just don’t like to do the recordkeeping, you probably need a bookkeeper as well.