Does Your Small Business Need An Accountant Or A Bookkeeper?

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Bookkeeping and accounting are core components of business finance that affect any business’s growth and overall success. This includes various tasks, ranging from basic data entry to software platforms that form the backbone of every business’s financial system.

But, unfortunately, while accounting and bookkeeping are crucial services for businesses looking to stay on top of their finances, most small business owners don’t know much about them.

Many people assume that accounting and bookkeeping services are one and the same. If you fall into this category, below are important things you should know before hiring an accountant or a bookkeeper.

Managing Your Small Business Finances

Most business owners prefer handling the financial details of their businesses, such as payments, payroll, and invoicing, during the early stages of the business. In most cases, business owners do so to cut expenses, enabling them to channel more money to specific areas requiring more support.

While this is an excellent idea, most business owners don’t know various business financial management strategies. As such, even if you try your best to track your finances and invoice, you might make simple mistakes that can lead to long-term problems.

Small mistakes, such as overlooking expenditures or entering wrong invoice amounts, can cause domino effects.

For instance, if you generate a financial report using incorrect numbers, you might experience cash flow issues because your business decisions will be based on incorrect figures. Hiring an accountant or a bookkeeper is a prudent way of protecting your new business.

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    In addition, hiring a professional will free you to focus on other important business tasks instead of being caught up with tedious daily tasks, such as report writing and data entry.

    If these tasks are taking too long, you will be the main bottleneck slowing your business growth. Delegating bookkeeping and accounting responsibilities frees you to focus on other activities geared towards business growth.

    Accountant vs. Bookkeeper: What’s the Difference?

    Most business owners think that accounting and bookkeeping are the same. Typically, bookkeepers record daily transactions or financial data of your business. Bookkeeping is clerical as it involves staying updated with ongoing transactions of your business, such as income and expenses.

    Bookkeepers also help with recurrent financial tasks of a business, such as invoicing and payroll. The basis of bookkeeping tasks is ensuring that your business’ accounting system is accurate and updated all the time. They support the entire financial system of a business, making it easy to pull reports and pay bills.

    On the other hand, accounting picks up from bookkeeping services. It involves designing financial systems that make it easy and accurate to record financial reports, prepare financial statements, interpret taxes, and other functions. While bookkeepers are focused on transactions passing through business accounts, accountants handle cash flow management and other components that accelerate business success.

    Apart from these tasks and responsibilities, accountants and bookkeepers also have varying educational requirements. Anybody can work on bookkeeping tasks with basic on-the-job training and high school certificates. However, accountants should have a college degree to execute these tasks.

    Based on this, accountants can handle and oversee bookkeeping tasks while bookkeepers cannot work on accounting tasks. If you need both services, consider hiring a team that provides financial management, including accounting and bookkeeping services.

    Bookkeeping Responsibilities

    As mentioned, bookkeepers keep track of everyday business finances. This includes recording all transactions and monitoring the general ledger. Common bookkeeping responsibilities include:

    • Record daily business transactions – Bookkeepers review source documents and post journal entries to accounting software and other administrative tools.
    • Reconcile transactions – Bookkeepers reconcile business bank accounts and monitor the general ledger to ensure that your accounts have the correct information.
    • Deliver reports – They prepare financial reports on balance sheets and income statements.
    •  Close books of accounts – Bookkeepers routinely confirm the accuracy of your financial statements to ensure that they are ready during tax season.

    Bookkeepers are generally beneficial to your business as they free up your schedule, minimize financial errors, and generate accurate financial reports. Hiring a bookkeeper also ensures that your books of accounts stay clean even before the tax season.

    Accounting Responsibilities

    Accountants use records provided by bookkeepers to create a bigger picture of your business’ finances. This makes it easy to make smart and accurate financial decisions. Financial summaries also provide insights about your business’s financial health to stakeholders and business owners. Accountant’s duties and responsibilities include:

    • Oversee bookkeepers’ work – They ensure that financial transactions captured by bookkeepers are accurate and free from any discrepancies. They also review various accounting transactions recorded in the books of accounts.
    •  Manage bookkeeping processes – Accountants should rectify any clerical errors made by bookkeepers. This ensures that your decisions are made from correct records.
    • Generate financial statements – Accountants adjust the trial balance, create income statements, cash flow statements, and balance sheets.
    •  Prepare tax returns – Accountants prepare financial reports that are required to file tax returns. Accountants can send the tax filings directly to the IRS or work with CPA firms that provide these services during the tax period.

    Accountants are also valuable advisors who can help business owners make sound business decisions. They can provide effective measures of cutting costs during harsh economic periods, predict the financial ramifications of purchasing new equipment on credit, and many other roles.

    Signs That Your Business Needs Accounting and Bookkeeping Services

    Overseeing your books of accounts during the early stages of your business may be easy. You can use excel, online templates, and accounting software. However, as your business grows, you may not be able to oversee these tasks conclusively.

    While businesses can fail due to many factors, poor accounting is a major cause of business failure. To increase your business chances of success, below are signs that you need professional accounting and bookkeeping services.

    • If you haven’t kept books of accounts below
    •  If your bills always get paid late
    • If customer payments aren’t updated regularly
    • If your bookkeeping records are not complete or don’t exist
    • If you are unsure of employee deductions to make
    • If you don’t know how to take advantage of various available tax deductions
    • If bookkeeping tasks are taking much of your time
    • If you aren’t making money as you projected. Professional accounting and bookkeeping services will guide you on how to cut business costs
    • If you don’t have enough time for other business tasks
    • If you update your books only before the tax season
    • If you need some break from this daily grind
    •  If you are overpaying your accountant

    In-House Hiring vs. Outsourcing

    If these signs that you need an accountant or bookkeeper are imminent, hiring an employee to handle financial tasks is prudent. However, before hiring another employee, consider various salary requirements and other overhead costs associated with making a new hire.

    Unfortunately, most small businesses have limited budgets to hire full-time accountants or bookkeepers.

    However, this shouldn’t limit you from accessing professional bookkeeping and accounting services. Outsourcing these services to professionals, such as Geekbooks, is a good way of managing your business costs while tapping on important financial support.

    You can access outsourced accounting and bookkeeping services for a fraction of the cost of hiring a full-time employee.