4 key differences between bookkeeping and accounting
by Mashum Mollah Finance 26 January 2019
If you run a company and have considered professional financial help, you’re not alone.
Many companies struggle financially, but are unsure whether they need an accountant or a bookkeeper.
The two jobs may seem indistinguishable – both deal with financial data and require accounting knowledge – however, there are key differences.
This article, provided by the accountancy experts at Howlader & Co, runs you through 4 great tips to help you find out what’s right for your business:
Accountants and bookkeepers’ roles
The most important difference between accountants and bookkeepers involves the nature of their roles.
Where bookkeepers record financial transactions, accountants then use this information to analyze and interpret that data.
Once an accountant has this data, they’re free to classify, investigate, summarise and report on what they’ve obtained.
When an accountants’ analysis is complete, they can create future strategies with this financial information.
The difference is comparable to that of a weatherman and a meteorologist: a weatherman will tell you it’s raining, but a meteorologist will tell you what weather patterns could mean for people over the next week.
What qualifications are needed?
Becoming an accountant, especially a Certified Public Accountant (CPA), requires a lot of work.
To earn the license of Certified Public Accountant, accountants must undergo 150 hours of education, including the following:
- A bachelor’s degree
- Passing the four-part CPA exam
- Two years of experience or tax preparation, though this can change depending on which state you’re in
On the other hand, no formal qualification is required to become a bookkeeper, although employers tend to prefer hiring individuals with at least an Associate’s degree.
After two years of bookkeeping experience, bookkeepers have the option to become a licensed Certified Public Bookkeeper (CPB). This qualification can open further avenues to bookkeepers, though is not essential.
Personal qualities required for each position
Bookkeepers must be detail focused and organized as a large part of their job involves storing and categorizing financial data efficiently.
In comparison, accountants make decisions about a business’ future based on what they’ve analyzed.
A quality accountant’s focus should, therefore, be on the bigger picture as they will be expected to forecast future possibilities based on their analysis.
Hiring an accountant or a bookkeeper, therefore, depends on if your business requires the need for processing data or using it to plan a financial strategy.
The future of bookkeeping and accounting
Innovations in easy-use accounting technology have meant changes in both bookkeeping and accounting.
Programmes involving cloud-based accounting have led some to believe the future of bookkeeping is linked to technology, streamlining the job as financial data becomes more easily accessible.
This means that hiring a bookkeeper with a solid understanding of this technology is a must. when looking to protect and preserve your data.
For accountants, the future also involves changes with studies showing that labor-intensive accounting tasks could be automated by 2020.
This would leave accountants more time to focus on areas like face-to-face interaction and client outreach, making their time more cost-efficient.
However, it is important to notice potential issues this technology could also bring with financial information being stored on online platforms like the cloud.
Some of these issues may include:
- Data breaches
- Server connectivity issues leaving companies unable to access their finances
The best bookkeepers and accountants, therefore, will regularly back up their data, keeping client information safe and secure.
Conclusion: Differences between accounting and bookkeeping
Although accounting and bookkeeping do seem similar at first glance, there are key differences – the most obvious of which is the treatment of financial data.
The analysis of accountancy can’t exist without the data collection of the bookkeeper.
However, financial data has little further used without the context and purpose provided in the analysis by the accountant.
Whether your business requires someone to crunch the numbers or analyze the data, therefore, accountancy and bookkeeping could hold the key to financial data improving your business’ performance.