Bookkeeping and accounting are important aspects of any business, yet to the untrained eye it can be hard to distinguish between the two. Both bookkeepers and accountants work with financial data and their services can overlap. Read on to discover the key differences between these two vital services for any business.
Roles
Bookkeeping is concerned with measuring, recording, organising and retrieving financial transactions, whereas accounting bookkeeping service involves analysing, interpreting, and reporting on financial data.
The remit of accounting, sometimes known as ‘the language of business’, is to interpret financial data gathered by the bookkeeper to make business decisions. For example, a bookkeeper may record that a store is selling a lot of cookbooks but only an accountant can advise on whether the business should buy more, offer a promotional deal or make an entirely different decision.
Aims
The role of a bookkeeper is to keep accurate records of all financial information.
The role of an accountant is to synthesise this information and turn it into a narrative so a business can make informed decisions.
Daily tasks
Bookkeepers handle data entry, recording receipts and invoices, sorting bank statements and paying suppliers and employees, preparing for year-end tax returns, and generally keeping finances running efficiently. Some bookkeepers may also produce financial statements and reports for analysis by an accountant or business owner.
The complexity of a bookkeeping system often relates to the size of the business and the number of transactions. Some businesses use accounting software which automates much of the bookkeeping process.
Accountants have a wider range of tasks that relate to the broader financial picture. They analyse information gathered by bookkeepers to carry out audits, generate financial statements, and forecast future business needs.
Expertise required
It is possible to become well versed in the basics of bookkeeping through experience or taking a short course in accounting.
To work as an accountant you need at least a specialist undergraduate degree. The higher entry qualifications reflect the complexity of the role.
Accountants with sufficient experience can apply for the title of Certified Public Accountant (CPA).
Accountants have a good knowledge of legislation and tax. The analysis they provide can tell you whether your company is profitable and provide recommendations for improvement. They can help with decisions such as hiring new staff, what to do about tax and expenses, and to identify where savings can be made. They can help you focus on the bigger picture and to predict the future financial performance of your business.
Areas of overlap
Some bookkeepers for small organisations will also classify and summarise financial data in reports, these are sometimes referred to as ‘full-charge bookkeepers’.
Accountants can also take charge of the bookkeeping aspect of the business and keep records of financial transactions.
As well as keeping track of transactions, bookkeeping software can create generate financial statements that were previously the remit of an accountant.
Different but equally important services
While there are significant differences between accounting and bookkeeping, both services work together to ensure the financial security of any business and are integral for long-term success and growth.
