What’s The Difference Between A Bookkeeper And An Accountant?

In short, a bookkeeper deals with the more day to day tasks involved in managing a company’s financial records. In contrast, an accountant will generally review and analyse the associated reports, look at the books at year-end to make any adjustment entries, complete the tax return, etc. Though, depending on the bookkeeper’s experience, there may be a crossover in the tasks performed.

What does a Bookkeeper do?

A typical bookkeeper has a long list of tasks they might perform. Overall, it is the bookkeeper’s responsibility to record all daily financial transactions within a business accurately. The primary ledgers a bookkeeper needs to keep, either on a computer or in manual form, are: 

Sales Ledger holds details of all sales the business makes, the amount of money received by the company from each sale and the amount of money still owing to the industry from those that have bought from them (known as debtors). 

Purchase Ledger details all the company’s purchases, and how much the business owes to people they have bought from, known as creditors. All associated paperwork, such as invoices and receipts etc., are kept carefully filed away. If required, they can be accessed quickly and efficiently to back up the records submitted. It is of paramount importance for any business owner to have well-managed records – these give him/her an accurate picture of their financial situation, enabling decision making and planning for the future. At the end of each financial year, these books are then checked, reconciled and filed. This is done by either a bookkeeper or an Accountant, depending on the bookkeeper’s experience and knowledge.  Failure to supply complete and accurate records to ATO can result in a penalty being enforced against that business. Other areas a book-keeper might work on are:

Bank Reconciliations – making sure everything balances each month is a critical task as a company must keep a close eye on what’s going out and coming into their bank accounts.

Payroll – Not all bookkeepers will process the payroll for a company; it is dependent on the size of the organisation they are working for. If they are processing the payroll, the bookkeeper will need to be up to date on the latest legislation and guidelines to be able to make appropriate deductions etc., to employees’ wages/salaries. 

Inventory – recording what a business has and where it is in terms of its stock in trade. 

They are reporting – producing reports such as Profit and Loss, Balance sheet etc. If working within a larger organisation, it is typical that different members of the accounting team will concentrate on other areas.

Career Advice: Accounting Vs. Bookkeeping

Accounting and bookkeeping’s distinctions are subtle yet essential to understand when considering a career in either field. Bookkeepers record the day-to-day financial transactions of a business. There are a lot of minutiae involved, and keen attention to detail is paramount. Accountants, by contrast, focus more on the big picture. At specified intervals, they review and analyse the financial information recorded by bookkeepers and use it to conduct audits, generate financial statements and forecast future business needs.

The two careers are similar, and accountants and bookkeepers often work side by side. These careers require many of the same skills and attributes. However, significant differences exist, like work conducted in each trade and what is needed to succeed. The following analysis compares the education requirements, skills required, typical starting salaries and job outlooks for accounting and bookkeeping.

Key Takeaways

  • Although they are job titles used interchangeably, bookkeepers and accountants are different positions with different requirements.
  • Bookkeeping is where accountants generally start their careers as the entry barriers are lower, and pay is decent.
  • Though not formally required to do so, accountants traditionally acquire their CPA certification and their Master’s degrees.
  • Bookkeepers can be considered to line up all the small pieces into a place where accountants view and arrange those pieces.

Required Education

Neither accounting nor bookkeeping imposes hard-and-fast educational requirements. You can find plenty of bookkeepers and even some accountants who have no further education than a high school diploma. Unlike careers such as law and medicine, state licensing boards determine how much education you need; with accounting and bookkeeping, the companies doing the hiring decide what to require candidates.

That said, landing an accounting job requires, in most cases, more education than becoming a bookkeeper. In the 21st century, most accountants hold bachelor’s degrees. Many have advanced degrees, such as MBAs with accounting or finance concentrations, or Master of Accountancy degrees. To sit for the Certified Public Accountant, or CPA exam, which is a common goal of many accountants, you must have a minimum of 150 postsecondary education hours. This is a bachelor’s degree plus 30 hours of graduate work; most CPA candidates go ahead and finish their master’s degrees.

You can become a bookkeeper right out of high school if you prove you are good with numbers and have strong attention to detail. Many aspiring accountants work as bookkeepers to get a foot in the door while still in school. Additionally, bookkeepers who excel at their jobs are sometimes promoted to accounting positions, even if they lack the level of education the company typically prefers.

Skills Needed

Accountants and bookkeepers work with numbers all day long. Therefore, those who do not like math get confused easily when making simple calculations or are generally opposed to number crunching should not apply.

Speaking of number crunching, that job duty is more common to bookkeeping than to accounting. Companies task bookkeepers with tasks such as recording journal entries and conducting bank reconciliations. As a bookkeeper, your attention to detail must be almost unnatural. Careless mistakes that seem inconsequential at the time can lead to bigger, costlier, more time-consuming problems down the road. You must be able to multitask. Rarely does a bookkeeper work on one big project for an eight-hour shift; instead, a typical workday involves juggling five or six smaller jobs.

As an accountant, you also have to crunch numbers, but it is much more essential to possess sharp logic skills and big-picture, problem-solving abilities. While bookkeepers make sure the small pieces fit correctly, accountants use those small pieces to draw much more significant and broader conclusions.

Starting Salaries

Both careers, accounting in particular, cover a broad gamut of starting salaries. How much you make as a first-year accountant depends mainly on the specific career path you pursue. While accounting can be a lucrative long-term career, most accountants, unlike corporate attorneys or investment bankers, do not command huge salaries during the first few years.

Public accounting generally pays the most to a candidate right out of school. In particular, the Big Four firms of Ernst & Young, Deloitte, KPMG, and PricewaterhouseCoopers offer larger salaries than mid-size and small firms. Depending on the city, you can expect to earn between $50,000 and $60,000 your first year as a Big Four accountant.

Mid-size and small public accounting firms pay, on average, about 10% less than the Big Four. If you choose to work for a company internally instead of doing public accounting, the starting salary range is very broad. In most cases, private companies do not pay more than the Big Four for young accountants with little experience.

Bookkeepers often get paid hourly wages rather than annual salaries. The average salary for someone new to the business is around $19-20 per hour. This is the equivalent of about $40,000 per year, assuming a 40-hour workweek.The advantage of hourly pay is you receive 1.5 times your average wage for hours worked more than 40 per week. In bookkeeping, extra hours are typical during the busy season of January to April.

Job Outlook

Like most fields, accounting and bookkeeping suffered contraction during The Great Recession. However, they have recovered nicely, with economists forecasting job growth of 13% through 2022 for the broader field of accounting, including bookkeeping. This is slightly higher than the overall growth rate that considers all fields.

Bookkeeping faces a specific challenge similar to switchboard operating, word processing and other fields in which software programs can perform many jobs humans once did. While technology has reduced the demand for workers to conduct the most trivial bookkeeping tasks, it has also increased the need for more skilled workers who can efficiently operate this technology while offering benefits programs.

Which One to Choose?

For a long-term career, accounting offers much more upward mobility and income potential. The education required to be competitive in the field is more excellent, but the payoff down the road can be considerably higher. That said, bookkeeping is a great starting point if you are interested in the field but not fully committed and want to test the waters.

You may also be an ideal bookkeeping candidate if you want an excellent job with a respectable wage and decent security but may not be looking for a long-term career. Bookkeeping offers much lower entry barriers, and the competition you face in the job search is less fierce.

Hate bookkeeping? These six tips will make it pain-free

If you love your business but hate bookkeeping, help is at hand. Follow these six tips to spend less time doing admin and more time doing what you love.

If you’re like most small business owners, you probably don’t usually feel a thrill of excitement at the prospect of doing the books.

Aside from being tedious and time-consuming, it isn’t the reason you went into business in the first place.

But in the long run, if you want to make your business venture the success it deserves to be, you’ll need to get on top of your financial admin.

Here are six tips for beating the bookkeeping blues.

1. Ditch unnecessary paperwork

OK, so not all paper will go.

The paperless office is like science fiction’s flying car: always predicted but never quite arriving.

Still, it would be hard to argue you need all that paper in your office when there’s software out there that can tackle bookkeeping more efficiently.

The problems with paper are legion.

It gets lost or misfiled; coffee gets spilled on it; you use it to scribble notes on when a client calls and then accidentally throw it away; it’s hard to locate documents when you need them (such as at the tax-filing time), and it’s challenging to keep up to date.

What you can do

The more you record digitally, the quicker it is to access, and the less time you spend doing the books.

Use accounting software for your bookkeeping (yes, that’s right, a good accounting solution will allow you to do the books and a lot more, too) to declutter your workspace of all that paper.

2. Digitise your receipts

If you added up all the time you spend gathering, sorting and filing receipts, you’d regret not spending it on more productive tasks.

The biggest problem can be finding them.

If you run a business on the move, they could be anywhere. Once they pile up, they’re challenging to tackle.

Getting on top of them takes a larger and larger chunk out of the day, so you put them off endlessly. But avoiding managing your expenses will lose you money in the long run.

You’ll probably end up paying more tax than you need to, and it’ll play havoc with your financial forecasting.

What you can do

By scanning and digitally recording receipts for just a few minutes every day, you can keep on top of them, keep the business finances up to date and save time.

You can use a smartphone app or a desktop scanner, included in many modern printers.

3. Invoice on time

It’s easy to become so busy with the day job that invoicing gets forgotten.

Don’t let this happen.

If you want to keep cash flowing into your business, you need to invoice as soon as the work is finished and accepted.

What you can do

If a job is tremendous, you could figure out how to invoice some of it in stages to ensure you can keep your business running while you work on the project.

Good accounting software will support invoicing, flowing data from purchase orders, automating repetitive tasks and avoiding the time-consuming and error-prone rekeying of data.

Many clients will automatically pay within the agreed period, usually 30 days. But some might need a nudge, which brings us to…

4. Make sure your clients pay on time

No one likes chasing clients for payment. After all, these are the people you need to win work from to keep your business growing.

You don’t want to upset them. But if they’ve agreed on a fee and an invoice schedule and accepted your work, they should pay on time.

Some might miss payment dates by mistake.

Others might try hanging on to their cash until they have to pay.

There may be some people who are in real financial trouble and are desperately short of cash.

What you can do

Look for accounting software that will track when invoices are overdue and either alert you or send an automated invoice reminder.

Sometimes an automated reminder is all it takes, relieving you of the unpleasant task of having to call to chase up your money.

And it’s worth keeping in contact with your clients too.

Having a regular dialogue with them means that if they are struggling to make payment on time, you have advanced notice and can take steps to make sure you’re not stuck when it comes to payday.

5. Automate your tax

No small business can avoid submitting tax documents – and that means finding and collating lots of different bits of information.

If that information is all over the place – in paper receipts and invoices – this becomes an annoying and burdensome task. You’ll probably put it off till the last minute, causing you extra stress.

And if you’re the kind of person who forgets to keep receipts or accidentally throws them away, you can end up paying more tax than you have to.

What you can do

Much of the taxation process can be automated by the right software tools if you keep your accounting up to date.

If you keep records throughout the year in your accounting software, your tax return needn’t be a pain when the time comes to file it.

6. Bank in real-time

Why wait for a bank statement to learn if your finances are fighting fit or at death’s door?

Internet and mobile banking make it easy to stay on top of your transactions as they happen – and with the right software, those transactions can be automatically reconciled with your business accounts, so everything adds up.

What you can do

Most banks offer online access accounts, and a good accounting software package will automatically pull transaction info from your bank account and reconcile it with your statements.

You can be proactive in managing your cash, spending, investments and borrowing. This will help your business access finance in the future and set it on a growth path.

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