No matter the shape or size of your business, your cash flow is the lifeblood of success.
This is about so much more than the profits in your business accounts. Your business cash flow concerns how you are able to track your money, invest in the future, secure funding, and take advantage of any tax breaks or grants you might be due.
This is where bookkeeping and accounting come in. In an era where small businesses are seeing their margins squeezed like never before, knowing whether a bookkeeper vs account is right for your business right now is essential.
Read this quick explainer to find out exactly what you need to know about small business bookkeeping and small business accountant services.
What Does a Bookkeeper Do?
The terms “bookkeeper” and “accountant” are often used interchangeably to vaguely describe a professional who handles your finances.
However, there are key differences that are essential to understand if you are trying to figure out what your business needs to survive and thrive. First, let’s start with bookkeepers.
Bookkeepers “keep the books” so to speak, meaning that they are responsible for handling the day-to-day transactions of your business. This means recording all relevant transaction data, including receipts, invoices, and expense reports.
They will maintain financial ledgers, make sure all bank accounts line up, and, crucially, manage your accounts payable and your accounts receivable.
Put simply, bookkeepers ensure accurate, well-organized record keeping so that you and the relevant authorities and stakeholders know exactly what is going on with your money.
What Does an Accountant Do?
Accountants have a wider remit, so to speak. While bookkeepers track and record the data, accountants interpret it and use this to empower better business strategies.
They will analyze your finances to try and determine how you are doing and where you are going. They will prepare your financial statements for investors and the public.
They will do your tax planning to help you secure any refunds, breaks, or relief you might be entitled to. They will help you create your budget for the quarter and the year ahead.
Basically, they will use the data gathered by bookkeepers to help you make informed decisions to get your business on sound financial footing.
Bookkeeper Qualifications
If you wish to hire bookkeeping services, you’ll want to get it right the first time. This means choosing a bookkeeper with the right education and qualifications.
Most bookkeepers have formal, higher education in the field. However, many highly skilled bookkeepers learned on the job. Some may hold a degree in accounting. Others may hold official qualifications such as a Certified Bookkeeper (CB) credential.
Always use experienced, local service providers. For example, those in North Carolina could make use of Bluefire Accounting bookkeeping to find a qualified, locally-trained bookkeeper for their business.
Accountant Qualifications
Almost all practicing accountants these days will hold at least a bachelor’s degree.
This can be a degree in accounting or a related field such as finance or administration. Ideally, you should be looking for accounting services from those who are Certified Public Accountants (CPAs). This is the industry standard.
It requires very rigorous exams and experience to obtain this qualification. If a certified accountant is willing to work for your business, hold onto them.
Financial Analysis
Both bookkeepers and accountants have crucial roles to play when making sense of your company finances. As mentioned, a bookkeeper will focus on making sure all transactions are accurately recorded.
They will ensure all financial information is accurate and up-to-date. This will help you understand how much money you have in the bank, now and in the future. This is the essential foundation of sound business planning.
From here, your accountant can take over. They will interpret and analyze all of that data. They will identify what you are doing well financially, and where you need to improve.
They will examine wider trends to help you plan for the future and seize potential opportunities. All of this will support the long-term financial goals of your company.
Taxation Matters
All companies must file taxes with the IRS. How much you owe depends on your profits, your losses, your expenses, and a wide range of other factors.
Bookkeepers and accountants both exist to keep your business compliant, and to ensure that you get a fair deal from Uncle Sam. Bookkeepers are essential for compliance. They will keep all of your records in line and will prepare all necessary documents for your company’s tax filings.
Accountants, meanwhile, are more likely to assist with tax planning. They are usually up-to-date on all relevant tax laws and codes.
They may be able to use this knowledge to help you reduce your tax burden and keep more of your money. Accountants are also better for more complex tax matters. This includes international taxation if you do business overseas, as well as audits.
Supporting Your Business Decisions
While bookkeepers give you a birds-eye view of your business, accountants can help you use this to make smarter decisions. Accountants – unlike bookkeepers – are active participants in your business strategy.
They are expected to inform you of all foreseeable financial consequences of any decisions you might make for your company. They will explain the risks and benefits of financial decisions and give you their view on which approach might be best.
This is how an accountant will help to facilitate the growth and expansion of your business or to survive a sudden contraction.
When You Need a Bookkeeper vs Accountant
For most businesses, having both a bookkeeper and an accountant on hand is a wise idea.
A bookkeeper is a must for small businesses. If you are overwhelmed by financial admin or fear falling into non-compliance, a bookkeeper should definitely be your first priority.
An accountant comes afterward when you are on top of your financials and need help turning that information into a long-term strategy.
Build Your Business On Solid Financial Foundations
Pitting bookkeeper vs accountant services against each other isn’t the right approach, since both are essential for a thriving business. Each serves a different, albeit crucial role.
If you need more actionable guidance on how to build your business, we have got you covered.
Our Finance guides offer real expert insights into how any business can secure the solid financial foundations to survive and thrive.
