Most people ask me the question: “What’s the difference between bookkeeping and accounting?” Let’s distinguish between the two once and for all.
Financial record keeping has been around for thousands of years. Our civilizations have always needed a way to debit and credit individuals for the exchange of products and services; some people had to literally count beans!
However, it wasn’t until the 1400s that advanced accounting began to take form. Rewind 600 years and basically everyone was a bookkeeper!
It’s no surprise that what exactly the difference is between these two roles is still confusing all these years later. As the marketplace evolved and complex tax rules were introduced, the difference between bookkeeping and accounting began to widen.
- Bookkeepers serve clients by doing the daily record keeping.
- Accountants take those daily records and perform year-end work.
Easy stuff, right?
But what are the specific duties of the bookkeeper versus an accountant, you may ask? Well here’s the breakdown of those responsibilities.
- Bookkeepers take care of the daily record keeping, with computer programs like Quickbooks Online, while completing the everyday tasks of invoicing and collecting payments. Your bookkeeper would also be responsible for filing and paying supplier bills. Every two weeks, they run payroll to make sure that your employees get paid on time.
- If the CRA requests an audit, a responsible bookkeeper should support the small business with CRA communication.
- Some sophisticated bookkeepers can even generate valuable financial reports to help the business thrive.
- For example, cash flow reports and projections can help a business owner manage cash.
- Business unit reports tell the business owner which business opportunities are performing, and which are losing money.
- Job cost reports can help professionals determine which jobs/projects made them money and how much.
- Your bookkeeper can give you the clarity that you’ve never had before while giving you the tools to take your business to the next level.
Essentially, the bookkeeper’s primary role is to support the business owner to help them make better decisions on a weekly or monthly basis.The bookkeeper’s role is to support the business owner & help them make better decisions Click To Tweet
- Once the bookkeepers have recorded all the transactions for the year, they give the financial records to the accountants who perform the higher level work, like reviews, audits, and filing tax returns. During that process, they may do some tax planning to minimize your taxes.
- An accountant may also help the business owner with more complex problems, such as cross-border expansion, fundraising, and estate planning.
As you see, both roles are integral. It’s important to have a strong financial team that can support you throughout the year and at year-end.
- Bookkeeping gives you the data to help you confidently make everyday decisions.
- Accountants help you reduce the tax burden and support you in complex business problems.
Hopefully, that has put to rest any confusion around the difference between bookkeeping and accounting. Now, you should have a better idea how to leverage the skills of a bookkeeper and accountant to improve your business’ performance.
Have more questions about the difference between bookkeeping and accounting?
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