The bookkeeper vs accountant argument is ongoing. Businesses looking for someone to help them with their finances are often unsure about who to hire. Should they hire a bookkeeper or an accountant? Should they hire a team consisting of both?
Here we will go in-depth on the definition, roles and responsibilities, scope, similarities, and differences, as well as the educational requirements of each, so that you can make an informed decision based on business needs.
TL;DR – Is Bookkeeping the Same as Accounting?
The simple answer to this question would be no.
- Bookkeeping involves recording all financial transactions, such as sales, expenses, invoices, and payments, to keep your financial records organized and up-to-date.
- Accounting takes those records, analyzes them, prepares reports, ensures compliance, and provides insights to help you make informed business decisions.
Think of bookkeeping as data entry and accounting as data interpretation. Both are important, but they serve different purposes.
Bookkeeper vs. Accountant: How They Differ
A bookkeeper handles all the financial information of an individual or business. They are responsible for organizing and maintaining an accurate and consistent financial record composed of transactions like sales, expenses, payments, and basically all the money going in or out.
An accountant’s role is to collect and store financial information, ensure that records are accurate, complete, and comply with the laws and regulations of the area, prepare financial reports based on bookkeeping records, and provide professional insights to assist business decision-making.
To put it simply, bookkeeping is generally about recording data while accounting is about turning that data into information.
What Does a Bookkeeper Do? Roles and Functions
Bookkeepers perform several duties involved in the upkeep of financial records. We mentioned these briefly above, and they also include tasks such as:
- documenting transactions
- listing all debits and credits
- tracking payroll
- issuing invoices
- checking accounting data
- maintaining a ledger
Balancing and maintaining a ledger is one of the main responsibilities of a bookkeeper. A ledger is a “book” that records account transactions like debits and credits.
Debit refers to money that flows in and credit refers to money going out. Ledgers can be physical records or digital through the use of bookkeeping/accounting software. The software streamlines the process of tracking these debits and credits. Some of the most popular include QuickBooks Online and Xero for smaller businesses and QuickBooks Enterprise and Netsuite ERP & Netsuite SRP for larger enterprises.
Note: Some laws require documentation for certain transactions. You can visit the IRS (or your country’s equivalent) website for more information on this.
Bookkeepers usually work under accountants. The minimum requirement to be a bookkeeper is a high school diploma or an equivalent. Some businesses may be willing to hire those without much bookkeeping experience and provide on-the-job training (OJT).
However, those who already possess financial knowledge and capabilities are definitely more desirable candidates. Bookkeepers can also obtain certifications to show their competence and expertise.
When Should I Use a Bookkeeper?
Use a bookkeeper when you need someone to keep your financial records complete, accurate, and up to date. This focuses on all money coming into and going out of the business. This means limited tasks like recording daily transactions. A consistent record makes it easier for an accountant to do their job later.
What Does an Accountant Do? Roles and Functions
Some accounting duties include:
- examining financial data
- creating and presenting various kinds of financial reports
- preparing necessary financial statements (e.g. tax returns)
- ensuring on-time tax filing
- conducting audits
- providing professional insights
- coming up with ways to improve financial operations
- informing business owners on the latest trends in finance
- assisting in the overall efficient running of the business
An accountant is also qualified to perform the duties associated with bookkeeping. A good rule of thumb is that accountants can be bookkeepers, but not all bookkeepers can be accountants. This is because there is a level of formal training required to become a professional accountant.
When Should I Use an Accountant?
In short, if you need more than a bookkeeper, you should hire an accountant. A bookkeeper is someone who records financial data. An accountant is someone who examines the data, interprets it, and presents it to the manager or owner of the business while providing professional opinions and valuable advice.
Accountants also create reports that provide crucial financial information that shows how a business is performing. Businesses rely on these reports in conjunction with the valuable expertise and guidance of the accountant to advise them on the next financial steps to take moving forward. If that sounds like the level of services you need, then use an accountant.
Bookkeeper vs. Accountant: Credentials & Qualifications
Knowing the credentials and qualifications of a bookkeeper and an accountant makes it easier to see how their expertise and authority differ.
Let’s break down what each role typically requires:
Bookkeeper
As mentioned, bookkeepers do not need to have a license to practice. However, those who wish to show that they are competent in their knowledge and skills, understand industry standards, and commit to continuing learning can opt to obtain certification. The American Institute of Professional Bookkeepers (AIPB) and the National Association of Certified Public Bookkeepers (NACPB) are institutions that both offer such licensing.
Accountant
Accountants are typically required to obtain a bachelor’s degree in finance or accounting before they can practice. Of course, this must be from an accredited school. Additional certifications are also available, like the CPA, CFA, and CIA. These certifications are typically obtained so that accountants can improve their abilities. They also function to help an accountant gain a position with a bigger company.
CPA (Certified Public Accountant)
A certified public accountant has comprehensive knowledge of tax law and codes. With this, they are able to give expert financial advice. A good CPA can present financial information in a way that is easy to understand. They also study to become well-versed in accounting software. During the hiring process for a CPA, you should consider candidates that know the industry you’re in. This makes it more likely that they are going to be able to meet the specialized needs of your business. If ever you are audited, CPAs can also represent you.
To acquire the professional designation of CPA, one must pass all the necessary local requirements and the Uniform CPA Exam. Continued education is also required to keep their accreditation status. The specialization areas for CPAs are personal finance planning, taxation, valuation, information management and technology assurance, and forensic accounting.
CFA (Chartered Financial Analyst)
The CFA certification is obtained through the CFA Program. This is a globally recognized credential that is highly esteemed in the accounting world. The program consists of three levels. The topics include portfolio management and analysis, ethical and professional standards, financial reporting and analysis, wealth planning, and others.
Investment professionals interested in completing the program must have at least 4 years of work experience in a relevant field. They must also pass the three-part exam. The CFA exam had a Level 1 passing rate of 36% in May 2022. Passers or charterholders bring a higher level of accounting expertise to the table.
CIA (Certified Internal Auditor)
CIA is a certification that accountants who conduct internal audits can obtain. This is an internationally accepted accreditation. An accountant must pass the required exam to maintain the license. They must also have a minimum of two years of experience working in a field related to internal auditing. Additionally, they need to have 40 hours annually of continued learning.
CPAs and CIAs can perform a lot of the same duties. The only differences are that CPAs are national. CIAs are globally recognized and do more specialized work.
Note: Businesses also have the option to hire full charge bookkeepers. These professionals take on the duties and responsibilities of a bookkeeper. They also take care of the accounting needs of a business. Full charge bookkeepers can create reports, present them, and even prepare financial statements and tax returns. Certified accountants can then review these documents. This is something of the in-between option if your business needs more than a regular bookkeeper but does not necessarily need the full services of an accountant.
Software Used by Bookkeepers vs. Accountants
Bookkeepers and accountants use different types of software, with each tailored to the tasks they handle in managing financial data.
Software Used by Bookkeepers
Bookkeepers focus on recording and organizing financial transactions, so their software needs are centered around data entry, transaction tracking, and basic reporting.
Common tools include:
- QuickBooks Online: Widely used by small and mid-sized businesses for managing invoices, expenses, and bank reconciliations.
- Xero: Cloud-based software that makes tracking expenses, invoicing, and payroll straightforward, with easy collaboration features.
- Wave: A free option suitable for freelancers and small businesses, offering basic bookkeeping features like income and expense tracking.
- FreshBooks: Focused more on invoicing and time tracking, but still useful for managing bookkeeping tasks.
These tools are designed to simplify day-to-day financial record-keeping and reduce manual entry errors.
Software Used by Accountants
Accountants, on the other hand, need software that goes beyond transaction recording.
Their work requires advanced reporting, tax preparation, audits, and financial analysis, so they typically use:
- QuickBooks Enterprise: Offers advanced features, such as custom reporting and industry-specific solutions, for accountants managing multiple clients or larger businesses.
- Sage Intacct: Cloud-based accounting software designed for in-depth financial management, including multi-entity consolidations and real-time reporting.
- NetSuite ERP: Enterprise resource planning software that provides comprehensive financial management, ideal for larger companies or those with complex operations.
- Microsoft Excel: Still widely used for custom reporting, data analysis, and financial modeling.
- CaseWare: Helps accountants conduct audits and ensure compliance with regulatory standards.
Cost for Bookkeeping and Accounting Services
The cost of hiring and maintaining a bookkeeper varies based on the needs of the business, the bookkeeper’s level of expertise, and the location of your business.
The wages for a bookkeeper also vary depending on the location of your business. Some states have higher wages, for instance. In the US, the salary for a bookkeeper ranges between $37,427 and $46,820 or an hourly rate of $18 to $23.
An accountant’s salary is about $59,900 per year or $30 per hour. However, just like with bookkeeping, expertise and accreditation affect those numbers as well as how in-depth and specialized your accounting needs are. Some accountants request a fixed price depending on the service while some charge hourly.
How to Choose the Right Professional for Your Business
When deciding between a bookkeeper and an accountant, it helps to look at a few key factors:
- Scope of Work: If you mainly need someone to record transactions, issue invoices, and keep your books tidy, a bookkeeper is your go-to. But if you’re looking for someone to analyze your finances, prepare reports, or offer advice on big decisions, that’s where an accountant comes in.
- Business Size & Complexity: Small or simple operations can often get by with a bookkeeper. Growing businesses, or those with multiple revenue streams or complex operations, usually need an accountant.
- Tax & Compliance Needs: Simple tax filings? A bookkeeper can help get your records in order. Complex taxes, audits, or strict regulatory requirements? Definitely lean on an accountant or CPA.
- Budget: Bookkeepers tend to cost less, making them ideal for startups or small businesses. Accountants come at a higher price, but you get deeper insights and professional guidance.
Pro Tip: A full-charge bookkeeper can handle bookkeeping and some accounting tasks. Their work is then reviewed by a certified accountant, giving you a practical in-between solution.
Frequently Asked Questions (FAQs)
Here are answers to common questions about bookkeeping and accounting to help you decide what’s right for your business:
Can One Person Do Both Bookkeeping and Accounting?
Yes, it’s possible for one person to handle both roles, especially in small businesses with straightforward financial needs. Many accountants are trained in bookkeeping and can manage daily transaction recording as well as financial analysis and reporting.
However, as a business grows in complexity, separating the two roles helps ensure accuracy and gives you specialized expertise where it matters most.
Should Startups Hire a Bookkeeper or an Accountant First?
For most startups, it makes sense to start with a bookkeeper. In the early stages, keeping track of basic transactions, expenses, and sales is crucial. A bookkeeper keeps your records organized and up to date, which makes it easier later when you bring in an accountant to analyze financial performance and handle tax filings.
If your startup has complex financial requirements from the start, hiring an accountant right away could be a smart move.
Do I Need a CPA or an Accountant for Tax Filing?
A CPA offers a higher level of expertise in tax law and compliance compared to a general accountant or bookkeeper.
If your tax situation is complicated, that is, if it involves multiple income streams, investments, or you’re facing an audit, then hiring a CPA is the safer bet. For simpler tax needs, a qualified accountant can handle tax filing just fine, as long as they’re experienced with your industry and local regulations.
How Often Should I Meet with My Accountant or Bookkeeper?
It depends on your business size and needs.
- Bookkeepers typically work daily or weekly, maintaining ongoing records.
- Accountants are usually engaged monthly, quarterly, or at least once a year for tasks like tax filing, financial reporting, and strategic planning.
At a minimum, meet with your accountant quarterly to review financial reports and plan for tax obligations. More frequent meetings are helpful if you’re making big decisions, expanding, or facing financial challenges.
Conclusion
The difference between a bookkeeper and an accountant is that bookkeepers record financial data and accountants interpret them, produce personalized financial reports, present this data to business owners, and provide helpful professional insights from those records.
All accountants may be bookkeepers, but only bookkeepers who have obtained the appropriate education and accreditation may be called accountants.
Now that we’ve given you the distinction, what do you believe is the right choice for your business and its financial management needs?
About EcomBalance
EcomBalance is a monthly bookkeeping service for eCommerce companies. EcomBalance handles your bookkeeping and sends you a Profit and Loss Statement, Balance Sheet, and Cash Flow Statement by the 15th of each month. EcomBalance also has a sister company, AccountsBalance, that caters to agencies, software companies, coaches, and other online companies.
