Accountants, Bookkeepers, and Why You Need Both

Stacy Kildal

Stacy Kildal

Contributor at Fundera
Stacy Kildal is owner/operator of Kildal Services LLC—an accounting and technology consulting company that specializes in all things QuickBooks. In 2012 & 2013, Stacy was named one of CPA Practice Advisor’s Most Powerful Women In Accounting. Stacy is one of the three hosts for the QB Show and has also been featured frequently on Intuit’s Accountant Blog, Community "Ask the Expert" forums, at various Intuit Academy To Go podcasts, as well as hosting a number of Intuit Small Business Online Town Hall sessions. She is a big fan of working mobile and has been recognized by Intuit as being an expert on QuickBooks Online, having written Intuit’s original courses for the US, Singapore and Canadian versions.
Stacy Kildal

That’s right, folks—it’s a good time of year to have a little chat about the difference between accountants and bookkeepers.

I’m the first person to correct someone who calls me an accountant. No, I always say, I’m a bookkeeper. Whenever someone wants to know what I do, I’ll ask if they’ve ever heard of QuickBooks. “Oh, so you’re an accountant?” is the inevitable reply—but no, I say, I’m a bookkeeper.

Then, more often than not, they give me a quizzical look.

This is the part where I explain the difference between an accountant and a bookkeeper.

Breaking It Down

The short version I give is this. A bookkeeper handles the day to day transactions for a small business and basic financial reports, so the accountant can prepare tax returns, tax planning and deeper financial analysis of those reports.

Technically, Merriam-Webster defines accountants and bookkeepers these ways:

Bookkeeper:

  • A person whose job is to keep the financial records for a business.
  • A person who records the accounts or transactions of a business.

Accountant:

  • A person whose job is to keep the financial records of a business or person.
  • A person who is skilled in the practice of accounting or who is in charge of public or private accounts.

That clears it up, doesn’t it?

Some states prohibit calling oneself an “accountant” unless they are a licensed CPA. The Michigan code reads as follows:

(1) Each individual having complied with the requirements described in section 720(1)(b) shall be known as a certified public accountant and any other person shall not use that title or the abbreviation “CPA” or any other word, words, letters, or figures to indicate that the person using them is a certified public accountant unless the use is specifically approved by the board. Use of the terms “certified accountant”, “chartered accountant”, “public accountant”, and “registered accountant” and the abbreviations “C.A.”, “P.A.”, and “R.A.” is specifically prohibited as being prima facie misleading to the public.

This is very similar to other states. While it doesn’t explicitly say that one cannot use the word “accountant” on its own, I’ve heard anecdotes about other states enforcing legislation and requiring non-CPAs to stop referring to themselves as such. Their reasoning has always been the same as my own personal belief that most people hear “accountant” and almost always think “CPA.”  Just something to keep in mind.

When thinking about accountant vs. bookkeeper, I think Brian Tankersley put it best:

“It’s like the difference between a doctor and a nurse in a hospital. The doctor sees you for a short period of time and is involved in big decisions, but the nurse is there, day in and day out, making sure things happen the way they are supposed to… The bookkeeper makes the accountant’s work possible by getting the transactions recorded in the ledgers. The accountant analyzes, adjusts, summarizes, and reports the data in the ledgers.”

But what’s the real difference? What are the tasks that an accountant or bookkeeper actually do for a small business?

Let’s look at an example of one of our clients, and how we, the bookkeeping firm, work with the accountant/CPA.

Income/Accounts Receivable

The client creates their own estimates and invoices, then receives payments against those invoices.

We enter the deposits in their accounting system, so that those transactions match what will ultimately show on the bank statement at the end of the month. We’re also matching these as they come in through the bank feed in QuickBooks Online.

Expenses/Accounts Payable

We also use Bill.com to manage all of their vendor bills. We get notified when the vendors email or fax their bills directly to the client’s Bill.com account, and then assign the proper vendor, expense category, and client as an approver.

The client gets notified, then reviews the PDF of the vendor bill and approves it for payment.

We then pay the vendor bill through Bill.com, which syncs the bill and bill payment to QuickBooks Online.

We now match that up to the bank feed, as we do with the deposits.

Account Reconciliation

As the month moves along, we’re matching transactions in QuickBooks Online to transactions coming in through the bank feed. For transactions generated outside of QuickBooks Online (like debit transactions, miscellaneous checks, and credit card transactions), we add them as they come in from the bank feed by assigning payees and/or expense categories.

At the end of the month, we get the bank/credit card statements from the client and reconcile each account, then close the period so nothing can be edited or deleted.

Throughout the Year

Periodically, the accountant will review the financial statements to ensure than any estimated payments need to be adjusted.

They might enter monthly or quarterly adjustments for depreciation or to expense out any prepaid liabilities, like insurance.

They might provide reviewed financial statements in certain situations, like if the client is applying for a loan, or perform an audit of the financials—we used to have a library as a client, and as an entity of the local government, they were required to go through a formal audit each year. We recently had a client apply for a new insurance policy and they asked for a compilation: these are CPA-prepared financial statements that don’t have the same sort of rigorous examination of data as a formal review or audit would.

Year-End

At the end of the year, we might assist in preparing 1099s for contractors, and if the client has payroll, we also verify that all of the quarterly returns tie out to the W2s and assist the client in preparing and issuing of W-2s. (Most of our clients are using QuickBooks Online Payroll or Intuit Full Service Payroll, so technically Intuit is calculating the payroll, processing the paychecks, submitting liability payments, and e-filing returns on behalf of the client.)

We work with the accountant/tax preparer to make sure they have all of the documentation they need from the client’s business to prepare the annual returns.

The CPA prepares the returns, and if they haven’t entered any adjustments throughout the year, they’ll enter them at this time. They’ll also determine the estimated payments the client needs to pay throughout the upcoming year, and make any other recommendations for tax planning.

Summary: Accountant vs. Bookkeeper

Your bookkeeper is going to work with you all year: entering data, helping you manage day-to-day transactions, and possibly assisting you tracking and sales tax as well as payroll tasks. They’re going to give you the up-to-date information to help you make decisions about hiring, what marketing strategies are working, what your biggest selling product or service might be, or how profitable a project or job was. The bookkeeper will help you make year-end and tax season easier by having all the information ready for the accountant/tax preparer to do their job. I like to tell our clients that one of our jobs is to serve as a “translator” between them and the accountant.

Your accountant is looking at the big picture: they take all the work that the bookkeeper has done all year to help you determine what your tax position is now, and what it will be in the future. They’ll be able to guide you about how your business should be structured—an LLC, S-corp, or C-Corp. In the event that you go through a state or federal audit they’ll be right there beside you, representing you to the auditor. Most of the accountants/CPAs that I know don’t really want to do the day-to-day bookkeeping, and almost all of the time, they’re going to charge more for this anyway.

I hear so many small businesses tell me that they don’t need a bookkeeper and an accountant. I chalk this up to there being a bit of confusion about the difference between an accountant and a bookkeeper, so hopefully this helped! Though they deal with the same information, bookkeepers and accountants manage different aspects of it—but it’s all vital for a small business owner.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
Stacy Kildal

Stacy Kildal

Contributor at Fundera
Stacy Kildal is owner/operator of Kildal Services LLC—an accounting and technology consulting company that specializes in all things QuickBooks. In 2012 & 2013, Stacy was named one of CPA Practice Advisor’s Most Powerful Women In Accounting. Stacy is one of the three hosts for the QB Show and has also been featured frequently on Intuit’s Accountant Blog, Community "Ask the Expert" forums, at various Intuit Academy To Go podcasts, as well as hosting a number of Intuit Small Business Online Town Hall sessions. She is a big fan of working mobile and has been recognized by Intuit as being an expert on QuickBooks Online, having written Intuit’s original courses for the US, Singapore and Canadian versions.
Stacy Kildal

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