Accountant vs. Bookkeeper: What’s the Difference?

What really is the difference? And which should you hire?

Should you hire an accountant or a bookkeeper? This is the question that confuses countless business owners, as roles can overlap. Properly deciphering between these two types of professionals can provide your business with the help it truly needs.

Bookkeepers generally take on more administrative roles, recording transactions and reconciling accounts, while accountants look at the big picture, including tax planning and growth strategies.

Let’s dive deeper into the main differences between bookkeepers and accountants, outlining the main roles, credentials, average cost, and pros and cons.

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What Does a Bookkeeper Do?

Bookkeepers handle the day-to-day operations of your accounting system. This includes billing customers, paying vendors, counting inventory, processing payroll, and reconciling accounts. The main goal of a bookkeeper is to create a clean general ledger by ensuring completeness and accuracy in transaction recording.

Bookkeepers still play an important role despite the widespread use of artificial intelligence and accounting software. Double-checking transactions flowing in from bank accounts and credit cards can detect any discrepancies and generate accurate financial reports.

Another important task of bookkeepers is generating regular financial reports. This includes the income statement, balance sheet, accounts payable aging schedule, and accounts receivable aging schedule. These four reports give insight into upcoming cash inflows and outflows and the financial stability of your business.

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What Credentials Do Bookkeepers Have?

Bookkeepers don’t need any formal education to hold a bookkeeper position. In fact, many companies are more concerned with experience rather than education. However, there are credentials that some bookkeepers have that add to their expertise and knowledge. Professional credentials demonstrate the bookkeeper’s commitment to continuing education and upholding professional standards.

First, bookkeepers can be certified through the American Institute of Professional Bookkeepers (AIPB) and the National Association of Certified Public Bookkeepers (NACPB). The AIPB requires at least two years of applicable work experience and the passage of a national exam. On the other hand, the NACPB requires bookkeepers to pass a test, retain 2,000 hours of work experience, and sign a code of conduct.

Bookkeepers can also become certified in specific accounting software programs, like QuickBooks Online. This can be beneficial if your business is looking for expert advice tailored to your software program.

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What is the Average Cost of a Bookkeeper?

The cost of a bookkeeper can vary based on the scope of services, experience levels, and surrounding market prices. Most bookkeepers develop their pricing structure based on the amount of time it takes to complete the tasks. For example, if you enlist the help of a bookkeeper for monthly reconciliations, you can expect to pay less compared to a full-year clean-up.

The complexity of your books can also dictate the price. Businesses with hundreds of sales and invoices each month will pay more compared to a business just getting started. Moreover, there can be price differences based on the type of bookkeeper you are employing. Hiring an in-house employee may result in employer payroll taxes and company benefits, while independent contractors won’t come with these types of expenses.

This is why it’s important to evaluate your business’s needs. Do you have enough daily work for an in-house bookkeeper or is it better to outsource to a freelance bookkeeper? Business owners gravitate toward the flexibility of outsourced bookkeepers, hiring on an as-needed or project basis. However, if your business needs help on short notice, your freelance bookkeeper might not be able to help like an in-house bookkeeper would. Nevertheless, expect to pay between $20 and $40 an hour for a bookkeeper.

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What are the Pros and Cons of Bookkeepers?

There are a few pros and cons of hiring a bookkeeper. The first advantage is lower costs. Bookkeepers generally charge less than accountants and can provide a more cost-effective solution for your organization. In addition, bookkeepers can help you track and organize your financial documents, which can then be passed off to your accountant.

The main con of bookkeepers is the scope of services they offer. If you are looking for an all-in-one expert, a bookkeeper might not be for you. This is because many bookkeepers don’t offer tax and accounting services in conjunction with bookkeeping services.

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What Does an Accountant Do?

Accountants take bookkeeping a step further, providing detailed analysis of your business’s financial health, preparing tax returns, and consulting your business on a wider range of issues. Other areas handled by accountants include verifying data, generating reports, piecing together forecasts, pinpointing opportunities for growth, and making adjusting entries. Accountants can also offer all of the same services that bookkeepers offer.

There’s a difference between a general accountant and a Certified Public Accountant (CPA). CPAs retain the necessary licensure to issue financial reports with assurance. This includes compilations, reviews, and audit services. General bookkeepers are usually not CPAs. Furthermore, accountants typically work with members of upper management and business owners, while bookkeepers work with managers and general employees.

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What Credentials Do Accountants Have?

Accountants can hold both educational and institutional credentials. Most accountants retain a bachelor’s degree from an accredited university; however, some accountants have an associate’s degree. A bachelor’s degree is required to sit for the Certified Public Accountant exam. To take the CPA exam, accountants must have the necessary work experience and educational credits. Once the exam is passed, accountants need to complete continuing education each year to keep their licenses active.

Accountants also can hold other credentials, such as a Chartered Financial Analysis (CFA) or a Certified Internal Auditor (CIA). These two certifications follow a similar format to the CPA exam, requiring a certain amount of work experience and educational credits. Additionally, accountants can hold the same credentials as bookkeepers, such as software-specific certifications.

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What is the Average Cost of an Accountant?

Accountants charge more than bookkeepers because they provide your business with specialized services. It’s not uncommon for accountants to charge anywhere from $100 to $250 an hour. If you are looking to hire an in-house accountant, the average salary is between $60,000 and $80,000 for a staff accountant position.

Some accountants will quote your project at a fixed price while others might choose to charge on an hourly basis. Be sure you know which billing method you can expect before starting the project or hiring an accountant. You don’t want to be hit with an unexpected bill.

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What are the Pros and Cons of Accountants?

Small business accountants can be worth the upfront cost. For one, the analysis an accountant provides can help you reach your operational and financial goals with added ease. Not to mention that having a trusted expert to turn to with any general business or tax questions is indispensable. You don’t want to be guessing on big decisions, such as entering a new market or switching business structures.

Additionally, accountants can help you mitigate lawsuits with the IRS and other regulatory agencies through dedicated compliance efforts. If your business does get a letter from Uncle Sam or faces a lawsuit, accountants are an excellent resource for compiling financial information.

The major drawback of accountants is their high charge rates. Even a one-hour phone call can cost your business a few hundred dollars. Although this can seem like a tough bill to foot, you need to think of the value you are getting in return. Maybe in that one-hour phone call you found three different ways to lower your tax bill, saving you money in the long run.

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Choosing the Right Professional

So, which professional does your business need? Both accountants and bookkeepers play an important role in the success of your business. To find the right fit for your business, consider your needs. Do you need help with the day-to-day management of transactions or are you looking for ways to reduce your tax burden? Bookkeepers specialize in managing daily duties, while accountants are well-versed in tax law.

Bookkeepers that aren’t CPAs can’t complete certain projects, such as auditing financial statements. Maybe your bank requires reviewed financial statements to renew a line of credit or prospective investors want more assurance on the documents they are receiving. When it comes to choosing a professional, you need to understand the capabilities of both accountants and bookkeepers.

Finding a happy medium between bookkeepers and accountants can help you maximize the value you receive while remaining within your budget. This might look like hiring a bookkeeper to manage the regular financial tasks of your business and enlisting the help of an accountant on an as-needed basis, such as around tax time.

It’s also important to consider the service type your business needs. Are you looking for an in-house bookkeeper or accountant? How about wanting to outsource these functions? In-house professionals can cost your business more money in payroll taxes and benefits and lead to lost profit during slow times.

At Avid Accounting, our team is dedicated to helping your business thrive through carefully crafted accounting services. We provide both bookkeeping and accounting services, making us your one-stop shop. Reach out to a team member today to see how our team can alleviate some of your accounting and bookkeeping burdens.