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Bookkeeping vs Accounting: What They Do & Key Differences

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The difference is that bookkeepers handle daily financial recordings and general ledger management, while accountants provide strategic financial insights and tax planning.

Bookkeepers are valuable at the early stages of doing business; accountants are valuable when financial complexities increase.

Bookkeepers generally command lower fees than accountants due to the less complex nature of their tasks.

As a business owner, understanding your business’ finances is vital. But, with terms like "bookkeeping" and "accounting" often used interchangeably, it can be confusing to grasp what each function entails and, more importantly, what each can do for your business. 

This article will explain the roles of bookkeepers and accountants, detailing their key responsibilities, when to hire each, and how they individually contribute to the financial health of your business. 

Without further ado, let’s get started.

 What is The Difference Between Bookkeeping and Accounting?

Bookkeeper

Accountant

Key Responsibilities

  • Record daily transactions
  • Manage general ledger
  • Can handle payroll
  • Prepare basic financial statements (e.g., balance sheet, income statement)
  • Analyze financial statements prepared by bookkeepers 
  • Offer financial advice
  • Assist with tax planning and filings

How They Impact Business

  • Organize financial records for compliance and tax
  • Bookkeepers signing off on financial documents hold less weight for tax authorities 
  • Strategic planning, such as budgeting and forecasting
  • Accountants are licensed similarly to file taxes for businesses in many jurisdictions
  • Tax Optimization beyond basic filing

When To Hire One

  • Typically needed at business inception
  • Consultable for financial structuring during business setup
  • Needed for complex financial tasks, such as planning, audits, or tax filings.

Certifications

  • Not typically needed unless specified by the employer
  • Essential for validating audited financial statements
  • Certain tax authorities require specifically credentialed accountants to file

Popular Service Providers

  • QuickBooks
  • Xendoo
  • Xero
  • Ernst & Young
  • Deloitte
  • Pwc
  • KPMG
  • BDO
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Tip: Consider local bookkeeping services, too, especially in combination with the global platforms mentioned above. Global providers might not be the best fit for all businesses.

What Does a Bookkeeper Do?

A bookkeeper's role is to be the keeper of the records of a company's financial transactions. They are responsible for entering data into ledgers, tracking and recording payments and receipts, managing invoices, and reconciling bank statements. 

Additionally, bookkeepers prepare basic financial reports like balance sheets and income statements, which are essential for monitoring the company's financial health.

Andrew Gosselin is a CPA, a former consultant at Pwc, a Big Four financial services firm, and a senior editor at The Calculator Site. He holds degrees in accounting and finance from Bentley University and has extensive experience in bookkeeping and accounting.

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“Simply put, a bookkeeper is responsible for accurately recording all of a company's day-to-day financial transactions, like revenues, expenses, payments, and deposits. They ensure that the books, ledgers and reports reconciling these activities are up to date, complete and provide an accurate snapshot of the business's current financial position at any given time. Bookkeepers may process payroll, record invoices and customer payments, pay bills, reconcile bank statements, manage accounts receivable and payable, and more.”

Andrew Gosselin
CPA, former consultant at Pwc
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What Does an Accountant Do?

An accountant takes on a more analytical role in financial management by using the detailed records prepared by bookkeepers to assess and interpret financial data. They perform audits, assist in tax filings, and offer consultancy on financial planning and risk management. They also often have certifications like CIMA, ACCA, CPA, etc. 

Expert Insight

Former Vice President of Tax at Bank of America, Current Partner at Pace & Associates CPAS

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Accountants like us take the clean, organized data prepared by bookkeepers to perform high-level analysis. This can include preparing and filing tax returns, performing audits, financial forecasting, and providing business advice. 

Accountants often hold certifications such as CPA (Certified Public Accountant), which signifies their higher education and expertise in the field.

Expert Insight - John Pace
John Pace
Former Vice President of Tax at Bank of America, Current Partner at Pace & Associates CPAS
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quote

Cost of Hiring Bookkeepers vs Accountants

Region

Bookkeeper Rates (estimate)

Accountant Rates (estimate)

US

UK

GBP 20-40/hour

GDP 50-100+/hour

Singapore

SGD 30-60/hour

SGD 80-200+/hour

Hong Kong

How To Choose Between a Bookkeeper and an Accountant

The decision to hire a bookkeeper or an accountant generally depends on the complexity and volume of your financial transactions, as well as your business needs.

When to Hire a Bookkeeper  

Typically, a bookkeeper is needed from the very start of your business or when the volume of bookkeeping tasks exceeds your capacity to manage them effectively.

Consider hiring a bookkeeper to manage daily financial transactions and closely monitor operational budgets. 

Bookkeepers are also essential for producing fundamental financial reports like cash flow statements and balance sheets. 

When to Hire an Accountant

Consider hiring an accountant when financial advice is needed or desired or for compliance reasons.

Strategic planning, such as cash flow analysis or budgetary forecasting, will require the expertise of an accountant. Obtaining appropriate loans or building business credit will require the guidance of an accountant. Building a business plan can also be improved with the advice of an accountant. Tax authorities in certain jurisdictions will also require an accountant to sign off on financial documents.

It’s not typical for business owners to hire accountants early in their business journeys, especially when the benefits are few - for example, tax savings may only come if the company has profits, but companies are generally not profitable early on. Note that if this is what your business’ finances look like, this doesn’t mean your business is doing badly, as an accountant may advise you. It might just be that the financial structure makes it so your business is considered unprofitable as it grows.

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Tip: While it’s possible for business owners to do their own bookkeeping and accounting, it is not recommended because errors will be costly and time-consuming to rectify as the business grows.

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Top Bookkeeping and Accounting Software

Selecting the right software is crucial for effective bookkeeping and accounting. Here, we explore some of the most popular tools tailored to meet the needs of various business sizes and sectors. Most of these tools function as Software as a Service

QuickBooks: QuickBooks is an accounting software offering a suite of features for both small and large businesses. It supports automated billing, invoicing, expense tracking, and payroll management and produces detailed financial reports for strategic planning and tax preparation.

Xero: Xero appeals to SMEs with its user-friendly interface. It provides real-time financial monitoring, easy bank reconciliation, integrated payroll, and customizable reporting, facilitating efficient team collaboration.

Xendoo: Xendoo provides specialized bookkeeping and accounting services for SMEs. It offers real-time financial data and integrates seamlessly with other platforms.

Each platform offers unique advantages, and the choice depends on your specific business needs, such as the volume of transactions, the level of detail required for financial reporting, and integration with other tools.

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Tip: We recommend checking out the 5 best accounting solutions in 2024

Statrys mobile application dashboard showing a total balance in a business account.

Conclusion

Understanding the key differences between bookkeeping and accounting can significantly impact how well a business can manage its finances and plan for the future. Both roles are crucial; however, they serve different purposes at different stages of your business cycle. 

Knowing when and whom to hire can make a substantial difference in maintaining the financial health of your business.

FAQs

What Are the Best Bookkeeping Services?

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Top bookkeeping services include QuickBooks Live for real-time assistance, Bookkeeper360 for full-service bookkeeping, and Xendoo, which are suitable for small to medium businesses. These providers offer reliable and user-friendly solutions.

What Are the Best Accounting Services?

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Which Is More Expensive, an Accountant or a Bookkeeper? 

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What Are the Key Differences Between Bookkeeping and Accounting?

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