Bookkeeping vs. Accounting: What’s The Difference?

Many people use the terms bookkeeping and accounting interchangeably. But are they actually the same? In fact, there are some nuanced yet important differences between these two finance-related fields. 

If you’re looking to hire some help with your finances, you should weigh the benefits of bookkeeping vs. accounting. You may only need a part-time bookkeeper to assist a full-time accountant. Read on to learn more about  bookkeeping for professional services and beyond, and how it differs from in-depth accounting needs. 

Key Differences Between Bookkeeping and Accounting

Bookkeepers and accountants are both important. You may grow your financial services team with a bookkeeper and then graduate to an accounting staff. Or, you may employ both types of services in tandem. Let’s talk about what each type of job requires. 

Bookkeeping tasks: What do bookkeepers do?

Bookkeeping is concerned largely with recording. This means recording transactions, invoices, outstanding debts, interest costs, and more. Bookkeeping is essential because it helps you organise daily financial transactions and benefits your long-term analysis. Some common bookkeeping tasks include:

• Tracking all incoming payments
• Tracking all outgoing payments
• Reconciling bank statements each month
• Conducting payroll tasks
• Sending invoices to customers

Accounting tasks: What do accountants do?

Accountants often take the work that bookkeepers have done and use it to create further analysis and insights. In addition to handling yearly taxes, accountants may generate complex reports that the Chief Financial Officer can use to direct overall company objectives and make major decisions. Where bookkeepers concern themselves with recording, accountants are focused on analysis. Accountants may complete tasks that include:

• Analysing the costs of operation
• Preparing and lodging annual returns
• Performing audits to catch errors
• Advising the executives about financial matters
• Summarising overall financial health

What credentials do bookkeepers have?

In Australia, bookkeepers may be certified through an organisation like the Institute of Certified Bookkeepers (ICB). This certificate verifies that a professional has been tested on their skills and is prepared to practice in the field. However, many people have bookkeeping experience without an official certificate or degree. 

What credentials do accountants have?

To become a Certified Practising Accountant (CPA) in Australia, professionals must do more than get a certificate. If someone is an accountant, they must have completed a degree or postgraduate award recognised by CPA Australia, finished the CPA Program (including 3 years of experience), complete annual continuing professional development activities, and comply with a code of conduct. Public accountants also finish the CPA Australia’s Public Practice Program.

Accountants may also become a Chartered Accountant (CA). Chartered Accountants belong to the Chartered Accountants Australia & New Zealand (CA ANZ). These professionals must complete an accredited degree or qualification, meet specific competency requirements, undergo a background check, and complete three years of Mentored Practical Experience to become Chartered Accountants. 

Do you need an accountant or a bookkeeper?

You know you don’t want your bank account to enter the red. And you definitely don’t want the government to issue a penalty on your taxes. But when it comes to day-to-day tasks, do you need an accountant or a bookkeeper?

Below, we explore signs that your immediate needs require an accountant. We’ll also discuss when a bookkeeper may be what your business needs. 

Signs you need an accountant

If you have your basic bookkeeping covered but you don’t know what to do with it, a certified accountant can step in and do wonders with your data. If any of the following conditions sound familiar, your business may need an accountant to help out.

• You have lots of figures, but you’re not analysing them. If you don’t really know what to make of your auto-generated financial reports, an accountant can save the day. Accountants interpret your monthly reports and give recommendations based on what they learn. 
• You don’t know how to lodge your taxes. An accountant can make sure you turn in your returns correctly and on time. This may help you avoid penalties. Properly prepared returns also help you take advantage of every credit you’re qualified for. 
• Your reports are very basic. Maybe you have a lot of accounts receivable and accounts payable reports, but nothing more complex. An accountant will give you big picture insights. You can learn more about your overall financial wellness when someone interprets your reports to look for trends and opportunities. 

Signs you need a bookkeeper

Maybe you need to get back to basics. Are you a new business owner or did you get behind in your bookkeeping over the last year? Playing catch-up bookkeeping can make a big difference. If these scenarios ring true, it may be time to phone a bookkeeper. 

• You can’t keep up with your general ledger. Your ledger tracks each transaction. A bookkeeper can step in and make sure that cash flow is being tracked and organised. 
• You are overwhelmed by payroll. As your team grows, you will need to add new benefits calculations and other deductions. A bookkeeper helps take this off your hands so the executive staff can worry about other vital decisions. 
• You don’t know how much money people owe you. Unpaid invoices are a major problem for many companies. A bookkeeper can catch your business up on accounts receivable and make sure you’re not leaving money in the wind. 

Should you outsource your bookkeeping and accounting?

A virtual bookkeeping service can transform the way you do your business. If you don’t have the budget to hire a full-time staff member — an outsourced contract may be the perfect solution. You can be paired with someone who knows your industry, and add new services as you need them. Someone who does online bookkeeping will become a trusted part of our team over time. You can also grow your team as your organisation grows. 

Outsourced bookkeeping is an excellent choice for growing businesses that want access to a larger candidate pool and are interested in saving money on staffing. 

The final word

Understanding bookkeeping vs. accounting is the first step. Next, you need to find a trusted partner. It’s wise to form a long-term relationship with your bookkeeper or accountant so they can learn your organisation from the inside out. Then, grow your team as you expand your operation. Learn more about how to outsource your bookkeeping needs with Visory and get started today.