What’s the difference between a Bookkeeper and an Accountant?
Some of the most common questions folks ask is, “what is the difference between a bookkeeper and an accountant?” and “Are there different tiers of accounting services?”
Short answer is yes. Bookkeepers tend to offer transaction-based recording into a company’s accounting system, such as checking account and credit card transactions, invoicing, etc. Bookkeepers organize receipts and data for business owners, but generally do not review financial statements or provide advice. In most cases, bookkeepers are not licensed, certified, or registered with regulatory agencies. Recordkeeping is important for every business; without good books, it is impossible for small businesses to prepare quarterly filings and annual tax returns. The bookkeeping industry is quickly changing as AI and cloud-based computer systems work with bank feeds to reduce input time and accuracy continues to improve.
Accountants usually hold a Bachelor’s or Master’s degree. They also may hold an additional professional certification such as a Certified Public Accountant (CPA), Enrolled Agent (EA), Certified Management Accountant (CMA), or other accredited title. These titles require ongoing continuing education and updates. Accountants are able to perform higher-level duties such as financial statement preparation, analysis, analyzing key ratios and performance indicators, cash flow and budgets, etc. Overall, accountants offer more client advisory/consulting services, and planning for the businesses they serve.
How about audits? Larger CPA firms go through a rigorous peer review process and are licensed with state regulatory authorities to provide audit and attest services. These firms are not allowed to do the accounting and then audit those books as it is a conflict of interest and couldimpair their independence for audit purposes.
Tax accountants are usually CPAS or EAs and are registered with the IRS to prepare and submit returns on their client’s behalf.
Many small businesses and organizations start out with a bookkeeper paired with an external accountant for tax filings until they expand enough to hire an in-house accountant. Others outsource their entire tax and accounting function. To determine what level of knowledge and service is best for you, we encourage you to meet with a few different service providers who will take the time to understand your needs and filing requirements. Accounting is not a one-size-fits-all service. We all specialize in various industries as the regulations and knowledge required for each can vary widely.