Yes, There Actually Is A Difference Between Bookkeeping And Accounting

Yes, There Actually Is A Difference Between Bookkeeping And Accounting

Difference Between Bookkeeping and Accounting

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A common question for growing companies who are considering outsourced accounting is: “What is the difference between bookkeeping and accounting?”

Bookkeeping looks after the day-to-day transactions and financial operations of a business or nonprofit. Accounting involves reviewing the accounting records and reports. This is an ongoing process to analyze and consult on overall business operations and financial health.

What’s covered in this blog:

Bookkeeping and accounting tasks

Bookkeeping tasks may include:

  • Entering expenses and income into accounting software;
  • Reconciling bank and credit card accounts;
  • Paying vendors;
  • Maintaining records; and
  • Flagging discrepancies.

Accounting tasks may include:

  • Financial reporting (e.g., balance sheet, income statement, statement of cash flows);
  • Financial analysis;
  • Financial consultation;
  • Database management; and
  • Staff management.

Difference between bookkeeping and accounting:

BookkeepingAccounting
ObjectiveSystematically keep records of all financial transactions.Analyze and determine financial health to aid in decision making.
Strategic PlanningMay provide financial reports but not directly involved in executive planning.Using the records from bookkeeping, an accountant’s reports should directly influence strategic planning.
Skill Sets-Organized
-Data entry
-Methodical
-Analytical
-Attention to detail within a bigger picture
-Critical thinking
TypesSingle entry or dual entryCash or accrual, tax, audit
Organizational HierarchyBookkeeper: Typically an entry-level finance position, reporting to a controller or accountant.Accountant/Controller: Typically a management-level position, reporting to an executive like the CFO or COO.

Pros and Cons of the modern-day accountant: Is the bookkeeper becoming irrelevant?

In shifting landscapes, bookkeeping and accounting are beginning to overlap in function and role. With more remote work we’ve seen more cloud bookkeeping tools offer financial reporting. And accountants “perform,” or at least oversee, more day-to-day operations with the automation of accounting.

Pros

  • More efficient;
  • Less overhead; and
  • Less human error.

Cons

  • Decreased opportunity for discussion and analysis; and
  • With one person taking care of both roles there’s less time for strategic planning. Action items like avoiding losses, gaining profit, reducing debt and maximizing cash can be more easily missed. That’s why many companies see the benefit in outsourced accounting services. You get the best of both worlds.

Related Read: Our Ultimate Guide to Outsourced Accounting Services Cost and Questions

What's the Difference? Bookkeeping vs Accounting Infographic

What does an outsourced bookkeeper do?

  • Manages all financial transactions in the accounting software/database;
  • Processes payroll;
  • Manages accounts payable and pays bills;
  • Manages accounts receivable and tracks outstanding invoices;
  • Performs bank and credit card reconciliations;
  • Checks for inaccuracies; and
  • Assists in financial reporting.

What does an outsourced controller do?

For our purposes, we’ll list the tasks an outsourced controller performs. Tax and audit accountants have another very specific list of duties.

When should you hire an accountant for your business?

Your business might benefit from an outsourced accountant if:

  • your staff are short on time and you need more insight from your finances.
  • you want to increase profitability or reduce debt.
  • you struggle to understand exactly how your finances are affecting your operations, or vice versa.

In these instances, an outsourced controller can help.

Related Read: How do I know if I need to hire a CFO vs. a Controller?

How much does it cost to hire a bookkeeper versus an accountant?

The average salary of a bookkeeper is $44,365, according to Salary.com. The salary of an accounting manager often falls in the range of $55,000-$90,000 per year, while the average controller salary is closer to $200,000+. These accounting fees can vary a lot depending on the nature of the work performed. So how much do outsourced accounting services cost? When you use our outsourced accounting services, you pay a fixed monthly rate that fits within your budget, starting from $500 per month. Learn more about our pricing here.

Still not clear on the difference between bookkeeping and accounting? Get in touch and we can help decipher exactly what kind of virtual accounting services your business needs.

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