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.
Bookkeeping & Accounting Defined
As their names would suggest, bookkeepers “keep” or manage your company’s financial books and records, while accountants “account” for – or analyze and explain – what’s in them.
As a result, accountants and bookkeepers work in tandem to ensure your company’s finances are not only organized, up-to-date, and compliant but that they’re being used to elevate your business performance.
Key Differences Between Bookkeeping and Accounting
|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
In any business, the potential to thrive and expand 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?
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
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.
Why Your Business Needs an Accountant
The valuable work that bookkeepers do is typically either reviewed by or performed under the supervision of, a Chartered Professional Accountant (CPA). Although many small or simply-structured companies find hiring a full-time accountant neither necessary nor affordable, there are certain business events and growth stages that warrant working with a CPA - if only temporarily.
What Does An Accountant Do?
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
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.
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 in providing your business with a comprehensive set of financial skills and services.
Partnering with an experienced bookkeeping organization will benefit your business enormously in terms of freeing 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.