Bookkeeping vs accounting: What's the difference?
When small business owners ask us about bookkeeping vs accounting, we explain that while these roles work hand in hand to support your business's financial health, they serve different purposes. Bookkeeping entails maintaining your business's daily financial records, while accounting takes those records and uses them to see the bigger picture of your company's financial health and future.
What is bookkeeping?
Bookkeeping is the foundation of your business's financial record keeping. It involves tracking and organizing your daily transactions to ensure your financial records are accurate and up-to-date. A skilled bookkeeper helps maintain the financial data that you will use to make important business decisions.
Common bookkeeping duties include:
Recording all financial transactions, including purchases, sales, receipts, and payments in your accounting software or books
Reconciling bank statements to ensure all transactions are accurately recorded and there are no discrepancies
Processing and recording payroll, making sure employees are paid correctly and on time
Managing accounts receivable and accounts payable to keep track of who owes you money and which bills you need to pay
Maintaining organized financial records and receipts for tax purposes and future reference
What is accounting?
Accounting takes the financial data that bookkeepers collect and analyzes it to give you insights into your business's financial health and help you make strategic decisions. An accountant will work with you to interpret the numbers and plan for your business's future.
Key accounting responsibilities include:
Analyzing financial data to identify trends and opportunities for business growth or cost savings
Preparing financial statements like balance sheets, income statements, and cash flow statements to give you a clear picture of your business's financial position
Providing strategic tax planning advice and preparing tax returns to ensure compliance while maximizing deductions
Creating budgets and financial forecasts to help you plan for the future and make informed business decisions
Offering business advisory services to help you understand your financial position and make strategic choices about your company's direction
Bookkeeping vs accounting: What sets them apart
The training and expertise required for bookkeeping and accounting differ significantly. Bookkeepers typically need a solid understanding of financial record-keeping and accounting software, along with attention to detail and organizational skills. Many bookkeepers have associate degrees or certificates in bookkeeping or accounting.
Accountants, particularly CPAs (Certified Public Accountants), undergo more extensive education and training. They complete at least a bachelor's degree in accounting, pass the rigorous CPA exam, and maintain ongoing professional education to stay current with tax laws and accounting standards. This advanced training allows accountants to provide more complex financial analysis and strategic guidance for your business.
Which service does your small business need?
Most small businesses benefit from both bookkeeping and accounting services, but your specific needs depend on your business's size and complexity. You might need a bookkeeper if:
You're spending too much time managing daily financial records instead of running your business
Your financial records are disorganized or falling behind
You need help with regular tasks like invoicing, bill payment, and payroll
You likely need an accountant when:
You want to understand what your numbers mean and how to use them to grow your business
You need help with tax planning and preparation
You're making major business decisions and need financial guidance
Your business is growing, and you need more sophisticated financial planning and analysis
Need bookkeeping or accounting support?
Many of our clients start with basic bookkeeping services and add accounting support as their businesses grow. We're here to help you figure out exactly what level of service will best support your business goals.
Learn more about our bookkeeping services for small businesses.