Regardless of your industry or your company’s legal structure, bookkeeping and accounting professionals are vital to the health of your business. And while the terms are often used interchangeably, there is a great difference between accountants and bookkeepers in terms of their roles when it comes to managing and leveraging your financial data.
Key Differences Between Bookkeeping and Accounting
| Bookkeeping tasks | Accounting Tasks |
|---|---|
| Record and categorize financial transactions | Review financial statements and account balances |
| Create customer invoices and collect payments | Prepare adjusting entries |
| Process payroll and remit payroll deductions | Perform financial analysis and financial planning |
| Conduct bank and credit card account reconciliations | Review or audit balances |
| Generate monthly financial statements such as income statement, balance sheet, and cash flow statement | Complete annual tax returns and conduct tax planning |
| Maintain general ledger and chart of accounts | Create financial forecasts |
Bookkeepers are required to know some basic accounting. They are integral to recording the day-to-day and monthly financial activities surrounding your organization’s:
Working with a designated accountant, meanwhile, is your best course of action when you need help analyzing and transforming those records into:
- Financial forecasts, projections, and budgets,
- Accurate and optimized tax returns, and
- Informed business plans and decisions
Here’s an overview of how taking advantage of both professional bookkeeping and accounting services can improve your business processes while leaving you to focus on what you do best.
Why Your Business Needs a Bookkeeper
The potential to thrive and expand in any business leans heavily on keeping an organized set of financial records. In fact, the more systematic your approach to bookkeeping, the easier it becomes to promote and monitor your company’s growth.
Because a bookkeeper’s responsibilities essentially revolve around reporting and recording financial transactions, they lay the foundation for better accounting analysis. That analysis allows business owners to make more impactful decisions about the direction their business is taking.
What Does A Bookkeeper Do?
I’s a bookkeeper’s responsibility to record your company’s daily transactions (preferably in an accounting software general ledger) so you and your accountant can use the information to make better financial decisions.The list of tasks performed by an in-house or outsourced bookkeeper is often quite long and usually includes working with your company’s general ledger to:
- Receive, enter, and pay supplier invoices,
- Verify and record expense receipts and employee expense reports,
- Generate customer invoices and statements,
- Record client payments and issue receipts,
- Processing your accounts receivable and accounts payable,
- Calculate and remit payroll deductions,
- Process pay cheques or direct deposit transfers,
- Perform bank account and credit card reconciliations, and
- Generate reports and monthly financial statements that include balance sheets and income and cash flow statements
- Categorizing and recording financial transactions involving business expenses and revenue
- Calculating and remitting sales tax
Because bookkeepers typically charge less than Chartered Professional Accountants (CPA), they offer a more cost-effective way to keep your books up to date in the long term.
Outsourcing these non-revenue-generating duties to a qualified bookkeeper would provide you with more time to focus on managing your company. Moreover, most professional teams are experienced in using powerful, cloud-based accounting software like Xero or QuickBooks Online to streamline the bookkeeping process.
Not only do online accounting programs like these save valuable time, but they also provide business owners with:
- Controlled access and enhanced data security,
- The ability to access their financial data from virtually anywhere, anytime, and
- The opportunity to integrate accounting functions with convenient receipt-tracking, payment, and scheduling apps, as well as all-in-one payroll solutions, reducing the need for manual data entry
Plus, working with a certified Xero or QuickBooks bookkeeping service provider is a great way to ensure you receive experienced care that’s ultimately designed to make your business run smoother.
Looking for a bookkeeper you can rely on?
Let's talkWhy Your Business Needs an Accountant
Bookkeepers' valuable work is typically reviewed by or performed under the supervision of a Chartered Professional Accountant (CPA). Although many small or simple-structured companies find hiring a full-time accountant neither necessary nor affordable, certain business events and growth stages warrant working with a CPA—if only temporarily.
What Does An Accountant Do?
Year-end accountants both verify the financial statements representing a business’s bookkeeping throughout the year—and prepare the final set of statements required to file that company’s annual tax returns. For example, your business should consider working with a certified public accountant cpa any time you need to:
- Close out your year-end accounts,
- Complete your annual tax return in a manner that’s both CRA-compliant, and that takes full advantage of relevant tax credits, deductions, and exemptions,
- Engage in financial planning, performance analysis, or cost and revenue management,
- Assess the feasibility of taking on a new loan or capital investment,
- Form, review, or revise your business direction or strategy,
- Have your financial records independently audited - especially if yours is a public or not-for-profit organization or if you’re thinking about selling your business
A year-end accountant’s core duties typically include:
- Reviewing financial statements for the fiscal year to determine any year-end adjustments
- Performing tax adjustments for items like charitable contributions, meals and entertainment, and depreciation
- Preparing (and often remitting) company tax returns
The general financial accounting that many CPAs perform revolves around reviewing, verifying the accuracy of, and interpreting your company’s bookkeeping transactions and financial reports. But in Canada, accountants may specialize in a variety of areas, including tax accounting, management accounting, non-profit accounting, and audit accounting.
No matter their area of expertise, all CPAs must adhere to Canada’s Generally Accepted Accounting Principles (GAAP). So, public or private, profit or non-profit, when you enlist the help of a professional accountant, you can be confident your business is following proper financial rules and procedures.
Why hire separate bookkeepers and year-end accountants?
1. Having an extra set of eyes helps prevent errors and fraud
If your year-end accountant also does your bookkeeping, they’ll be less likely to catch their own mistakes across the accounting process. Worse, it’s not unheard of for an independent bookkeeper or accountant to take advantage of a business owner’s trust and financials.
One Halifax accountant was recently charged with defrauding his organization for almost $1.5 million.
Because he was responsible for both downloading company bank statements and financial reporting, this accountant was able to carry out a series of allegedly “improper and unauthorized transactions” involving:
- Misstated financial records (including underreported revenues received and excess cash available)
- Altered bank statements
- Periodic repayments designed to conceal the misappropriation of funds to his personal credit card account
By having a bookkeeper manage your books—and an accountant review your financial data at the end of each year—you’ll benefit from having two sets of eyes peeled for potential errors and oversights.
This can prevent costly penalties and help bring fraudulent activity to light, allowing your business to mitigate the risk of tax fraud, embezzlement, and other financial violations.
2. Tax accountants specialize in year-end, not day-to-day financial activities
In the same way that you wouldn’t consult a skin doctor about your ulcer, you shouldn’t rely on a tax accountant for your bookkeeping needs. Dermatologists and gastroenterologists may both be qualified physicians, but they specialize in different areas—and accountants are much the same.
By hiring a separate year-end accountant whose focus is tax return preparation, tax law, and optimizing tax reductions, you can feel confident knowing you’re working with authority on all things tax-related.
Meanwhile, professional bookkeepers (and financial accountants) spend their time immersed in debits, credits, and everyday business transactions. That means you can rely on their having the knowledge, expertise—and time—to keep your day-to-day books accurate and up to date.
3. Bookkeepers can provide more consistent service
Many businesses tend to have a December 31 or March 31 fiscal year-end, which results in businesses sharing the same tax deadlines. Many accountants are exceptionally busy and distracted come tax season.
If you rely on a year-end accountant to do your bookkeeping:
- You could have trouble connecting with them during this time
- Their focus on your bookkeeping could be intermittent or put on hold for several months
- Real-time visibility into your cash flow and other financial information could be impacted
Having accurate, timely books is fundamental to the success of your business. Working with separate bookkeepers and year-end accountants gives you greater financial oversight and ensures your books are updated consistently from month to month.
As a bonus, your bookkeeper can liaise directly with your year-end accountant to provide financial statements and answer their questions. That way, you can stay focused on growing your business and avoid any tax season stress.
Benefiting from the Best of Both Worlds
The best way to capitalize on the difference between accountants and bookkeepers is to recognize that each relies on the other to provide your business with a comprehensive set of financial skills and services.
Partnering with an experienced bookkeeping organization will benefit your business enormously. It will free up time to better manage your inventory, your team, and your company’s growth.
But while the right back-office team will give you the bookkeeping support and data you need to make better business decisions, drawing accurate conclusions from that financial information with the help of an accountant is equally important for consistently moving your company forward.
At Enkel, we provide business owners and non-profit organizations with bookkeeping support and data through our team of experienced CPAs and bookkeepers. We also work closely with accounting firms to help compile the necessary information for year-end adjustments. Chat with us to learn more about how we can help streamline your bookkeeping process!
How We Select and Evaluate Our Software Recommendations
We thoroughly research and test the apps we include in our regular workflow for Client bookkeeping services. After deciding on criteria for evaluating the software and then researching the app itself, we tested the app, noting its strengths and weaknesses. We then work with the app for at least a few weeks before deciding whether to recommend it to our readers. We use the software as it was designed for its intended tasks. For a detailed walk-through of how we select and evaluate software, please see the details of our process.
