What is the Difference Between Bookkeepers and Accountants?
Bookkeeping vs. accounting, it’s all numbers at the end of the day, right?!
Unfortunately, nothing is ever that easy. Think of it like a line cook and a pastry chef, it’s all food but drastically different principles.
As a private practice owner (and business owner in general), you’ll need both a bookkeeper and an accountant/tax professional (You could also have a cook and a pastry chef too; I’m not judging!), so it’s important to understand the differences.
Here’s what you need to know:
Bookkeepers or Accountants? The Simple Answer
Bookkeepers perform day-to-day recording of income, expenses, liabilities, equity, assets, etc, in a business. (The keeper of the records!)
Accountants take bookkeeping to the next level with tasks such as forecasting, financial analysis, financial advice, creating financial reports, quality control, and managing/overseeing the bookkeepers.
Understanding the Primary Functions of Both Bookkeeping and Accounting
The Purpose of a Bookkeeper
A bookkeeper handles ALL of the day-to-day organizing and record-keeping of your business finances. When a client makes a payment to your private practice, you give gifts to your employees or contractors, you have payroll taxes, or you purchase a bunch of office furniture, those all have to be recorded, categorized, and reconciled on your books to ensure your data and numbers are accurately captured for tax time. A bookkeeper ensures the recording, categorizing, and reconciling are done correctly, and in alignment with how your business is formed as well (LLC, Corporation, etc). A great bookkeeper will be able to turn that day-to-day data into killer financial reports for you that show you exactly how much you’re making, spending, and have left over each week, month, quarter, year, etc. (whatever you’d like). An amazing bookkeeper is going to be able to help you evaluate those financial reports so you can really learn about the financial health of your business and make sound business decisions.
The Purpose of an Accountant
Now, an accountant takes all of that data and work the bookkeeper has compiled for you on the books and prepares your annual business and personal taxes without pulling their hair out with a messy stack of papers! A great licensed tax professional like an IRS Enrolled Agent (EA) will be well-versed in your industry, state, and filing status (LLC, Corporation, etc), so that they can help you with any tax planning for your private practice (and even your personal taxes). An amazing accountant will always be on top of the ever-changing tax rules and regulations and be proactive about making sure you’re doing what’s best for your business, tax-wise – even if that means changing things to align with new tax rules & regulations.
Another point to note is that bookkeepers and accountants are both financial professionals and have very different skill sets and career paths. Sometimes, there is an overlap, but they generally handle two drastically different parts of your private practice! More often than not, I’ve found that my colleagues who are strictly tax preparers loathe any type of bookkeeping and have no desire to handle it because they just love preparing taxes! The day-to-day, nitty-gritty work, though? Not so much!
Accounting and bookkeeping both provide essential financial services for your business, but they're actually different skill sets.
Can a Bookkeeper File My Taxes For Me?
As a small business owner, you might wonder, "Can a bookkeeper file my taxes for me?" Understanding the distinction between a bookkeeper and an accountant is crucial in this context. A bookkeeper manages your day-to-day financial records, including recording financial transactions, reconciling accounts, and generating financial statements. While bookkeepers play a vital role in maintaining accurate and organized data, they typically do not have the qualifications to file taxes. An accountant, especially one with a degree in accounting, has the expertise to engage in different types of accounting, such as interpreting these records, ensuring compliance with tax laws, and preparing and filing your taxes. Therefore, while a bookkeeper ensures your records are accurate and up-to-date, it is the accountant who leverages this data to complete your tax filings.
In the bookkeeper vs. accountant discussion, it's important to recognize that both professionals are essential for a small business. Bookkeepers handle the detailed work of bookkeeping, using accounting software to maintain precise records and produce critical financial statements. Accountants, often working in a public accounting firm, use these records to provide strategic financial advice and file taxes. For business owners, having both a bookkeeper and an accountant ensures a seamless financial operation. The bookkeeper's accurate data and the accountant's expertise in tax laws and financial strategy work together to support your business's financial health and compliance, making tax season much smoother and less stressful.
In short, anyone can file taxes, even those without qualifications, but we highly suggest working with a qualified and highly knowledgeable tax professional, like an EA (IRS Enrolled Agent). A bookkeeper or anyone unqualified also can’t give you tax advice (unless licensed), so you need to consult a licensed tax professional for help with those accounting topics. Taxes are complicated, and there can be serious consequences for filing incorrectly. For more information on EAs and CPAs, please read our article: Understanding the Difference Between an Enrolled Agent and a CPA.
Bookkeeper or Accountant - Which does your private practice need?
So, as I mentioned earlier it’s a good idea to have both a bookkeeper and an accountant. There’s a reason for this! When you have a great bookkeeper making sure your finances are in order correctly, then they can provide you and your accountant with beautiful financial reports that tell your financial story, and your accounting professional then uses those reports to seamlessly prepare your taxes. This organization saves you time and money on tax prep services and gives you the peace of mind that you have everything covered. Plus, they keep your financial story clear throughout the entire year because you always know how much you make, how much you spend, where the money was spent, and what was left over!
You can focus on what’s important in your private practice to you, plus have financial control!
Therapeutic Tax Solutions is a virtual accounting firm that provides bookkeeping for therapists as well as bookkeeping for dentists all across the United States. Apply with us for more information regarding our professional bookkeeping and tax planning services!
FAQs Regarding the Differences Between Bookkeepers and Accountants
What is the role of a bookkeeper?
A bookkeeper plays a crucial role in the financial management of a business. They are responsible for recording and organizing financial transactions, maintaining records, and producing statements.
What is the difference between a bookkeeper and an accountant?
While both bookkeepers and accountants work with financial data, bookkeepers focus on daily transactions and recording (bookkeeping), while accountants analyze and interpret financial information to help make strategic decisions (accounting).
Do I need to hire a bookkeeper or an accountant for my small business?
Hiring a bookkeeper can be beneficial for small businesses as their bookkeeping services ensure accurate records and provide valuable insights into the accounting process. However, you need to hire an accountant to help with filing your taxes and other small business accounting needs.
What qualifications are required to become a bookkeeper?
While there is no specific degree requirement to pursue a career in bookkeeping, having a background in accounting practices or completing a bookkeeping course can enhance your chances of becoming a successful bookkeeper.
How does bookkeeping software help bookkeepers in their role?
Bookkeeping software simplifies the process of recording and categorizing financial transactions, generating reports, and ensuring accurate financial data management. The software can generate the records that are so vital to business operations as well as support the tax accountant in their role.
What are some common tasks that a bookkeeper may perform?
A professional bookkeeper records all financial transactions and may be responsible for maintaining the general ledger, reconciling accounts, preparing reports, and assisting in the preparation of financial statements.
How can a bookkeeper and an accountant work together effectively?
Bookkeeping and accounting are both integral parts of running your business, but understanding the differences between bookkeeping and accounting is essential. Professional accountants and bookkeepers can work together effectively by maintaining clear and consistent communication, ensuring that financial records are accurately updated and readily available. The bookkeeper manages the daily recording of transactions and financial data, while the accountant uses this data to perform higher-level financial analysis, provide strategic advice, and handle tax filings, creating a cohesive and efficient financial management system for the business.