The Difference Between an Accountant and a Bookkeeper (and Why You Need Both)

The titles "accountant" and "bookkeeper" are often used interchangeably in business, so many confuse the roles or assume they are the same thing. You may be surprised to learn of the significant differences between an accountant and a bookkeeper, and the roles they perform.

The distinction is important because of one glaring difference between bookkeepers and accountants: cost. Accountants typically charge a much higher hourly rate than bookkeepers.

Consequently, relegating basic bookkeeping tasks to an accountant will leave you overpaying for financial services.

Bottom line: Accountants charge much more than bookkeepers, so you risk overpaying for basic financial tasks.

Bookkeepers vs. accountants: What's the difference?

A bookkeeper is an administrative professional who follows a specific set of procedures or tasks related to the day-to-day financial management of a business. While the job may require specific skills, software knowledge and training, becoming a bookkeeper requires no formal education or certification.

However, bookkeepers typically take a bookkeeping course or certification program to stay competitive in the field. For example, the National Association of Certified Public Bookkeepers offers a licensing program for industry professionals who wish to expand their expertise in the field.

An accountant is a more specialized financial professional who handles higher-level financial structuring and analysis for a business. Becoming an accountant requires a four-year college degree in accounting or finance, or in business administration with additional specialized training.

Also critical is the distinction of a certified public accountant – or CPA – which is a higher standard accounting professional who has completed sufficient training to pass the Uniform Certified Public Accountant Examination. This certification ensures that all CPAs operate according to standardized methods and ethical requirements. CPA exams are rigorous, consisting of four different tests administered over a four-hour period. The minimum score to pass the CPA examination is 75, according to the American Institute of CPAs.

While some accounting firms – or accounting departments within large companies – may comprise both certified and noncertified accountants, it is essential that at least one CPA holds ultimate responsibility to manage your company's finances. [Read related article: How to Hire the Right Accountant for Your Business]

To help you match the right task with the right professional for your business, let's break down the tasks most commonly assigned to bookkeepers and accountants, respectively.

Did you know? CPAs need to pass a rigorous four-hour exam in order to be certified.

Editor's note: Need a bookkeeping or accounting service for your business? Fill out the below questionnaire to have our vendor partners contact you with free information.

Common bookkeeping tasks

With proper standards and procedures in place, a trained bookkeeper can manage these tasks for your firm: 

• Prepare and send invoices.
• Record payments from customers.
• Monitor late payments and send payment reminders.
• Record, process and pay invoices from suppliers.
• Monitor and record inventory changes.
• Process petty cash transactions.
• Categorize credit card and other daily expenses.
• Process payroll.

Depending on how often your company requires these tasks to be completed, and the size of your business, you might choose to complete them yourself, assign them to an existing employee, contract with a third-party bookkeeping service or hire a full-time bookkeeper. Some accounting firms also offer bookkeeping services at a separate rate.

Specialized responsibilities for accountants

These higher-level, more specialized tasks should be handled by a CPA (or by noncertified accountants with the careful oversight of a CPA):

• Create and manage the chart of accounts.
• Accrue and defer revenue and expenses.
• Design and maintain financial statements.
• Build financial forecasts.
• Create a budget and compare it to actual expenses.
• Generate custom financial reports to address specific issues.
• Determine estimated taxes and prepare tax documents.
• Monitor issues related to financial and tax compliance.
• Identify potential tax write-offs or other profit-maximizing opportunities.

Because these important tasks tend to be relatively infrequent, most small and midsize businesses work with an outside CPA or accounting firm on a contract basis to meet their accounting needs.

How hiring a bookkeeper will save you money 

Too often, small businesses tend to leave bookkeeping tasks undone or poorly completed, forcing the company's CPA to complete these tasks before they can handle  higher-level accounting duties. In fact, this issue is so widespread that many accounting firms maintain in-house bookkeepers to handle related projects.

Particularly if you pay your accountant on an hourly basis, this can mean spending a mint on administrative tasks that could be completed at a much lower cost.

To reduce spending while maximizing the effectiveness of your financial team, work with both a quality bookkeeper and a certified public accountant. Ensure they communicate regularly and are using the same standardized methods and best practices. Understanding and properly delegating these roles will ultimately improve your bottom line.

Software alternatives to hiring a bookkeeper or accountant

If you'd rather not hire a bookkeeper or an accountant, you do have another option for managing your company's finances: choosing a software provider. Let's look at the benefits of choosing software to handle your firm's bookkeeping and accounting tasks, rather than hiring an additional contractor or employee.

Lower costs

If you decide to hire a bookkeeper or accountant, you'll likely need to purchase their preferred software and cover their individual rates. With that in mind, choosing good accounting software can eliminate the need for a bookkeeper or accountant, saving you money in the long run. A few popular bookkeeping tools are Zoho Books, FreshBooks, Xero and Kashoo. 

Here's an overview of what each program has to offer:

Tip: You can learn more about some of the best accounting software options in our review of Zoho Books, our FreshBooks review and our review of Xero.

Lower risks

Opting to use software rather than hiring an accountant or bookkeeper is also a good way to minimize business risks. The more external sources that have access to important data, such as your business finances, the higher the risk of a data breach. Practicing due diligence during the hiring process is always a great way to minimize risks, but sticking to software can also ease your mind when it comes to your business information's security. 

Accuracy

Simply put, human error is always a possibility, even if you've hired an expert accountant or bookkeeper. Accounting software, however, eliminates the risk of small, costly errors that can impact your regulatory compliance. Compliance errors can cause irreparable damage to any brand, not to mention the potential IRS fines. Some accounting software providers offer to handle any issues that arise as a result of accounting errors, even offering to provide IRS representation and cover fines.  

Meredith Wood contributed to the writing and research in this article.