What’s the Difference Between Bookkeeping and Accounting, and Which One Does My Small Business Actually Need?
By Sherley Perest, Founder & Certified Professional Bookkeeper, SherOps Bookkeeping, Edmonton, AB
When I started SherOps Bookkeeping here in Edmonton, one of the questions I heard most often from new clients was some version of, “Don’t I already have an accountant for this?” It’s a fair question, and after more than a decade working in bookkeeping, payroll, and CRA compliance, I still find it’s the one that causes the most confusion for new business owners. Bookkeeping and accounting work together, but they serve different purposes in your business.
A simple way to understand the difference is that bookkeeping is more operational, while accounting is more strategic.
Your bookkeeper works with the day-to-day financial activities of your business and makes sure your records are accurate, organized and up to date. Your accountant uses that financial information to provide higher-level accounting, tax and strategic advice. Shopify’s rundown of bookkeeping vs. accounting, covers the general distinction well if you want another perspective. What I’d add from actually doing this work day to day is where the line gets blurry in practice, which is what the rest of this post is about.
What Does a Bookkeeper Do?
Bookkeeping focuses on the ongoing financial operations of your business. Depending on your needs, your bookkeeper may:
- Record and categorize income and expenses
- Reconcile bank and credit card accounts
- Manage Accounts Receivable and Accounts Payable
- Record loans, assets and other Balance Sheet transactions
- Manage payroll and payroll remittances
- Prepare and file GST/HST returns
- Maintain your Chart of Accounts
- Prepare regular financial reports
- Clean up or catch up your bookkeeping
- Prepare your books and year-end reports for your accountant
At year-end, the bookkeeper makes sure the accounts are reconciled and the bookkeeping records are complete. The year-end reports and supporting information can then be provided to the accountant for the next stage of the process.
What Does an Accountant Do?
Accounting takes the financial information prepared through the bookkeeping process and looks at the bigger picture. Depending on the accountant and the services required, this may include:
- Reviewing the year-end information prepared by the bookkeeper
- Making year-end adjustments when required
- Preparing or compiling year-end financial statements
- Preparing corporate income tax returns
- Providing tax planning and advice
- Reviewing complex accounting or tax matters
- Providing financial analysis and strategic business advice
In other words, your bookkeeper helps make sure the financial information is accurate and ready, while your accountant can use that information for tax, reporting and more strategic decisions.
Which One Does Your Small Business Need?
For many small businesses, the answer is both, but for different purposes. You may work with your bookkeeper throughout the year because bookkeeping is part of the ongoing operation of your business. Your accountant may become more involved at year-end, tax time, or when you need specialized accounting or tax advice. The two roles complement each other.
When your bookkeeping is properly maintained throughout the year, your accountant receives organized and reliable financial information at year-end. This can make the year-end process smoother and reduce the amount of time spent trying to correct or reconstruct the books.
Do I Still Need a Bookkeeper If I Have Accounting Software?
Accounting software is a tool. It doesn’t replace bookkeeping knowledge. Bank feeds may bring transactions into your accounting software, but the software doesn’t always know how a transaction should be recorded. Transactions can still be duplicated, misclassified, recorded in the wrong period or posted to the wrong account. Your bookkeeper makes sure that the information going into the system makes sense and that your financial reports accurately communicate what is happening in your business.
Operational and Strategic Support Working Together
Your bookkeeper and accountant don’t have to compete for the same role.
Bookkeeping provides the operational financial foundation of your business. Accounting builds on that foundation to provide tax, reporting and strategic support.
If you’ve been handling this yourself and are weighing whether it’s time to bring in help, our look at the real cost of DIY bookkeeping walks through how to think about that decision.
Want to see how this works in practice? Learn more about SherOps’ Edmonton bookkeeping services, or read more about our team on the About page.
