There is the do it yourself approach for managing the finances of your business but it might not work out for you in an efficient manner. Therefore hiring an accountant or a bookkeeper becomes important for tracking the data of your business. For making good decisions for your business and ensure that you have a cash flow in a healthy manner, small business owners need their financial data to be accurate and current. As the business grows there is the need for taking on more vendors, employees, and customers, with it the complexity of the money getting in and out of the business increases, and much more time gets consumed.
That is the time when the accounting tasks get a bit harder to do on yourself, and there the need of hiring an accountant or bookkeeper comes into the picture. But the dilemma that whether you need to hire an accountant or a bookkeeper comes up. There are times when people use the terms interchangeably and there are things that overlap in their working as well but there is some well-defined difference between them for sure. Let us see what you need to know about the professionals before making the decision of hiring one of them.
The Work of Bookkeepers
The bookkeepers handle the daily task of recording the transactions that related to the finances which include payments, sales, purchases, and receipts. There are plenty of small businesses that use QuickBooks Hosting for keeping track of the credits, debits, and entries. The different experts say that the role of a bookkeeper can differ depending upon the size of the business and the uniqueness of their needs. If we take an example, a small business without an accountant will make the bookkeepers have more responsibilities and pressure.
Their responsibility will include the processing of payroll, receivables, payables, and also the tasks that are related to the wide distribution in the bigger companies. At the big firms, the bookkeepers generally are expected to do the monthly reports, data entries, and bank reconciliation. According to the chair and professor of accounting at the University of Wisconsin Whitewater Department of Accounting said that the designing of bookkeeping has been to generate data about the activities of an organization, while accounting has been designed for turning the data into information.
These are the different tasks that the bookkeepers can be assigned with:
- Handle accounts payable
- Send out invoices and manage accounts receivable
- Manage bank feeds
- Maintain accuracy with the records
- Handle the regular management of accounts
- Manage the cash flow
- Perform stocktake
- Preparation of the books of an accountant
- Ensure the business stays in compliance with the laws
- Process the payrolls\
- Deal with the transactions of foreign currency
- Preparation of the books of an accountant
Benefits of Hiring a Bookkeeper
These are some of the benefits that can be availed with the hiring of a bookkeeper:
- Analysis: One of the prime benefits of hiring a bookkeeper is that they have the skills of analyzing the standing of a company on a financial level. With the help of bookkeepers, businesses can make some well-informed decisions related to their finances.
- Prevention of Errors: This benefit is considered much more important as avoiding errors can take the business to the next level with the hiring of a bookkeeper. Even the business owners who are most seasoned are prone to make errors if they are not trained in bookkeeping properly. The errors could happen like incorrect entering of data, mix up types of expenses, and entry missings.
- Extra Time: As bookkeeping is not an easy task so it takes an ample amount of time which gets saved when you hire a bookkeeper. There is freeing up of more time and with it, the employees can give time to the other aspects of your business.
The Work of Accountants
The work of an accountant is of analyzing the data, verifying it, and using it for the generation of reports, preparing financial reporting records, and performing audits like balance sheets, tax returns, and income statements. The analysis of an accountant can give information for growth opportunities, forecasts, and trends for business. The professionals can also give you advice on restricting the expense for managing the cash flow. In a book, Accounting for Dummies (For Dummies, 5th edition, 2013), the author of the book Johny Tracy wrote that accountants do look at the big picture.
They step and back and say that they do the handling of plenty of rebates and coupons. How these transactions should be recorded? The net amount of the sale needs to be recorded or the gross sale amount as well? Once the accountant has decided the way to handle the transactions then the carrying out can be done by the bookkeeper. According to Bryce Warnes, If the accountant that you hire does the bookkeeping as well then you might be paying more than you need to pay for this kind of service. The reason is that one needs to pay more per hour if there is an accountant in place of a bookkeeper. Some people also need to know that there is a difference between an accountant and a certified public accountant (CPA). Both of the professionals can do the preparation of your tax returns but a CPA is more knowledgeable with the tax codes and if you are audited then they can represent you before the IRS as well.
While most of the small-sized businesses do the hiring of an accountant as a consultant outside the company, there is diversification in bookkeeping. Some of the small business owners do the bookkeeping on their own with the software they have been recommended or seen being used by their accountants. They provide it to the user on a quarterly, monthly, or weekly basis for action. There are other small businesses that are capable of employing a bookkeeper or have a small department of accounting with clerks for data entries who report to the bookkeeper.
No matter whether you are planning on hiring an accountant or a bookkeeper or both of them, it is really important to know that the individuals are qualified. This you can assure by asking for references from clients, certification check, or running of screening tests. The bookkeepers might not always be certified and the burden gets more on the experience.