Aren’t a bookkeeper and an accountant the same thing? In short, no.
A bookkeeper enters your business transactions in a spreadsheet or accounting program, balances them (called reconciling), and provides basic reports.
An accountant is a professional. An accountant has at least a college diploma. Certain types of accounting even require a four year College or University diploma and ongoing certification. There are different types of accountants including management accountants, tax accountants, and general accountants.
For your small business you will likely come into contact with a tax accountant. A tax accountant may help you set up your business entity to reduce taxes, and prepare your yearly tax returns. Your accountant should be local as a local accountant will know the important deductions and tax rules for a business in your area. For example, in the UK you are only allowed to claim meals as business expenses if you meet outside of the town where you live. A local accountant in the UK would know that, but an international accountant might not.
Your bookkeeper will enter your transactions into a spreadsheet or accounting program, and then your accountant will review that information and make any necessary changes.
Do you really need a bookkeeper and an accountant?
Bookkeeping can mostly be done yourself, but if you’ve never done it before get some guidance. Unfortunately accounting programs provide very little guidance in the way of bookkeeping if you’re not already familiar with what to do. Once you have a system in place, bookkeeping is simple and can be handed off to junior employees.
Not using an accountant is a little more risky. An accountant has specialized knowledge and may be able to lower your tax bill in ways that you will not be able to guess about. However, if you are bootstrapping and short on cash, it is possible to do your taxes yourself using a tax program. Once you have the means, take the return to an accountant to review.
If you can only hire a bookkeeper or an accountant, hire an accountant. They are specialized knowledge. Bookkeeping is something that can be done in house.
Why is it important to know the difference?
You need to know who to hire when you have a problem. It’s frustrating to spend time and money hiring a bookkeeper and then find out they aren’t qualified to do your taxes. Likewise, hiring an accountant for your bookkeeping will push your budget way up.
If you’re trying to save money, the most efficient place to save is in bookkeeping. Get guidance from an accountant and keep costs low when you’re first starting out. Make sure you hire the right professional for the job.
Are you looking to hire a bookkeeper or an accountant? If so, tell me in the comments. If not, are you doing it yourself?