Good financial records are an essential part of the foundation for any successful business. No matter how well the business owner understands their business activities, he or she may need some assistance keeping their finances in order.
Some business owners might be tempted to keep track of their finances on their own, but this can become too time consuming to handle alone.
There are two main types of people a small business owner might consider hiring: a bookkeeper and an accountant. Many people use these terms interchangeably, but there are some distinctions between a bookkeeper and an accountant.
A bookkeeper is a financial practitioner who has basic knowledge of managing finances. Bookkeepers generally don’t have a degree in accounting or finance, but may be working toward earning their degree. They typically handle simple business finances like payroll, keeping track of bills, creating invoices, and balancing the company’s general ledger.
An accountant, on the other hand, has earned a degree in accounting or finance, which makes them qualified to deal with more complex financial needs. They can perform all the duties of a bookkeeper in addition to other more complicated tasks that require a higher degree of expertise.
They can file taxes and produce financial statements such as balance sheets, cash flow statements, and loss and profit reports. A good way to remember the difference between the two is that bookkeepers record the information while accountants analyze that information and turn it into important reports.
Whether a bookkeeper or an accountant would be best for your company ultimately depends on what your business’s financial needs are.
Generally speaking, a small or medium-sized businesses whose financial needs are pretty simple and straightforward can do just fine with a bookkeeper for their day-to-day needs and see an accountant on an as-needed basis.
A full-time accountant may be better suited to larger businesses that have a higher volume of financial records to maintain or do business internationally.
However, there may be times when a small business could benefit from having the help of an accountant, such as if they’re dealing with taxes or when a new business is being formed. If you have plans to expand your business in the near future, it might be worth consulting an accountant to make sure all of your finances are in order and have them provide advice on your plans for your company’s finances.
Accountants can be a valuable source of advice on any financial decision you can make that involves your business. You may even want to have both an accountant and a bookkeeper working for you.
Accountants commonly design a bookkeeping system for accountants to follow and depend on information recorded by the bookkeeper to do their jobs and having another person to keep an eye on the books can be a way to deter embezzlement or fraud.
If you’re trying to decide between an accountant or a bookkeeper, consider what you can afford to pay. Since accountants have degrees and often take classes to earn special certifications, they can command a higher salary than a bookkeeper because of their level of education and training.
This is a big reason why many smaller businesses use a bookkeeper for day-to-day purposes, but see an accountant when necessary.
Author Bio: Angela is a writer from the Detroit area who spends her time writing about a wide variety of subjects including manufactured housing, home organization, small businesses, film, and SEO.