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Accountant or bookkeeper?

This is a common question many Chicago business owners and managers ask when contemplating how to outsource part or all their accounting functions. While the two titles are often used interchangeably there are important differences that should be identified when it comes to the professional’s focus and specific tasks. Certainly, there can be overlapping responsibilities that contribute to the confusion, but the reality is there are significant and important differences.

One way to summarize the difference is the role of a bookkeeper is primarily focused on recordkeeping while accountants focus on compiling the data into actionable reports. The information in these reports is typically used by management, shareholders, suppliers, and creditors. Understanding the difference is important when evaluating the organization’s needs and identifying the most appropriate outsourced solution. To help clients, prospects, and others, Selden Fox has provided a summary of the key differences and similarities below. 

Bookkeeper

A bookkeeper’s primary job is record-keeping. It’s a role that is primarily transactional and informational. A bookkeeper manages and organizes daily transactions for accounts receivable, accounts payable, sales, payroll, and more, depending on the business.

A more granular view might include:

  • Pays bills and vendors
  • Enters sales transactions and produces invoices
  • Manages payroll
  • Reconciles monthly bank and credit card statements
  • Prepares basic financial statements (for record-keeping and informational purposes only)

There’s no certification or licensure requirement, but bookkeepers can obtain credentials to demonstrate proficiency in areas like QuickBooks, or they can seek accreditation through the American Institute of Professional Bookkeepers or the National Association of Certified Public Bookkeepers.

A qualified and able bookkeeper frees up the business owner’s time and keeps the books organized. It’s an important role. Where a bookkeeper’s responsibility generally stops is where an accountant’s work really gets going.

Accountant

An accountant can also maintain updated books and records; however, this role takes the financial information several steps further. Common areas of responsibility include:

  • Summarizing financial activity in period-end reports
  • Adjusting entries as needed
  • Overseeing the general ledger
  • Conducting period-end reports
  • Preparing tax returns and/or financial statements for use by official government and regulatory bodies and other stakeholders
  • Interpreting and analyzing financial data
  • Filing applicable forms, such as grants or government relief programs

Accountants use the information in reports to generate forward-looking cash flow forecasts, projections, and key performance indicators (KPIs). They look at the big picture to make recommendations for business opportunities to save money, scale up, minimize taxes, improve efficiencies, maintain compliance, and more.

An accountant typically has an accounting degree. They need not be licensed; however, advance certification can be obtained. The highest accounting credential is the CPA, or certified public accountant. In areas of advanced business complexity, a CPA is best positioned to advise on the financial and tax impact of certain business decisions. 

Which one should a business hire?

Whether an organization needs a bookkeeper and/or an accountant greatly depends on the circumstances. Here are a few factors to consider.

Growth Stage

If the company is just starting out and doesn’t have immediate plans for growth, then a bookkeeper may function just fine. A bookkeeper will help small business owners manage the business rather than the numbers as well as keep the records accurate from the start. On the flip side, if rapid or sustained growth is in the works, an accountant would be better positioned to support the company’s evolving accounting and reporting needs. A bookkeeper is essential to keep the business organized, but an accountant will know how to interpret the data to help with strategic decision-making.

Type of Work

Executives need to consider the type of work that will be performed. Is it keeping records organized or is it preparing financial statements for a bank or other lender to review? How will the data be used, and by whom? If it’s for internal record-keeping, a bookkeeper should satisfy the need. If the data will be used externally and will need to be analyzed, an accountant is likely the better choice.

Type of Industry

The business sector matters, too. Some industries have more complex financial needs than others, for example, government, healthcare, and higher education. Even in high-volume industries like retail or hospitality, a bookkeeper may keep track of daily records, but an accountant can advise on strategic opportunities.

Timing: When to Outsource

For start-up businesses and organizations, the best time to hire an outsourced financial professional is at the very beginning. Accurate and thorough record-keeping can keep a business on track as it progresses and grows. When business needs begin to outpace a bookkeeper, then an accountant can seamlessly step in and offer strategic guidance. 

The two roles may even work together. An in-house bookkeeper maintains regular financial and payroll records, and then hands them off to an accountant, who would:

  • Look for opportunities to reduce taxes and taxable income
  • File quarterly and annual tax returns
  • Compile audited financial statements
  • Handle any IRS or regulatory inquiries

In addition to the above considerations, if the business itself is complex and needs extra support, an accountant may be an excellent choice. Situations like different revenue streams, a large inventory, various compliance requirements, and several employees (or employees who live and work in different geographic areas) can lend themselves to hiring an accountant, even if the business itself isn’t in an aggressive growth stage.

While hiring an accountant may be a more significant investment you should in turn be adding a level of knowledge, training, and financial support that is also at a much higher level – especially with a CPA. A bookkeeper is well-suited for managing daily transactions and the regular financial record-keeping for the company. When it’s time to grow or the financial complexities have outpaced the role of a bookkeeper, hiring an outsourced accountant can provide immense value and return on investment.

Contact Us

The good news for Chicago businesses is there are several options available, often customizable, to meet specific financial reporting and compliance needs. Whether the solution is an outsourced bookkeeper or accountant, entirely depends on circumstances. If you have questions about the information outlined above or need assistance with outsourcing, Selden Fox can help. For additional information call 630.954.1400 or click here to contact us. We look forward to speaking with you soon.

Greta Hanson

Greta Hanson is an accounting solutions manager at Selden Fox.  She works with mid-size privately held businesses as well as nonprofit organizations and government entities taking responsibility for month-end and year-end close, and general ledger maintenance, among other accounting services support.