Bookkeeper vs Accountant vs CPA vs Auditor
Bookkeepers help businesses document transactions systematically, maintain and update financial records accurately, pay and issue invoices on time, and generate reports representing a company's financial standing. An accountant can replace a Bookkeeper, but entry-level Bookkeepers cannot fill the role of accountants.
Accountants help businesses, organisations or governments make strategic decisions by using a Bookkeeper's records and their own expertise to formulate budgets, review, analyse and interpret financial data and performance. They may also supervise the work of Bookkeepers, checking their records and data for accuracy. Other responsibilities include cost savings and compliance with regulations. Some accountants may specialise in taxation. While the educational background of a Bookkeeper or accountant matches the role's responsibilities, accountants generally hold higher qualifications, are more trained and, with experience, may rise to senior management or executive positions.
Certified Public Accountants (CPAs) are professionals who have met rigorous requirements and passed relevant examinations. Therefore, they carry out more complex functions than accountants.
Auditors are specialised accountants who review a company’s financial statements and verify the accuracy of other accountants’ work. Internal auditors work from within, identifying accounting errors in time to prevent fines or investigations. External auditors also examine an organisation’s financial records and reports but are hired from outside and typically work for independent accounting firms.
Thus, the role of a Bookkeeper is distinct from that of an accountant, CPA and auditor in its educational requirements, requisite skills and knowledge, and scope of responsibilities. Companies and recruiters must evaluate the financial needs of a business and hire personnel accordingly.
Some Tools That Bookkeepers Use
Accounting software, such as Quickbooks or Xero, is useful for Bookkeepers to generate and file financial reports and documents that adhere to industry standards. Bookkeepers collaborate with their colleagues via phone, email, fax and in-person meetings. They are frequently in charge of scanning paper bills or other paperwork, uploading it to their software or storing it on a hard drive.
Types Of Bookkeeping Systems
Single-entry bookkeeping, the most straightforward bookkeeping system, records each transaction as a single journal entry. As a cash-based bookkeeping method suited to businesses with few or relatively uncomplicated transactions, it tracks business expenses and cash sales as outgoing or incoming cash or as cash paid or received when a transaction occurs. Using a cash book, Bookkeepers begin with the existing cash balance for a particular period, add the income received and subtract the expenses incurred. At the end of the given period, all transactions are factored in to calculate the final balance. A cash book typically records the transaction date, a brief description, the transaction value, whether incoming (debit) or outgoing (credit), and the balance or a running total of the cash in hand.
A double-entry bookkeeping system is used by businesses that conduct complex and capital transactions and have accounts payable/receivable. Under this system, each double-entry transaction or “journal entry” is posted in two columns, debit on the left and credit on the right. While carrying out journal entries, Bookkeepers must follow the accounting equation: Assets = Liabilities + Stockholders’ Equity. For instance, if an asset account increases, it is matched by an equivalent increase in a related liability or shareholder’s equity account or by an equal decrease in another asset account to keep the accounting equation balanced.
Single-entry bookkeeping uses a cash register to record the income and expenses for transactions, while the double-entry system begins with entries in a journal, then in a ledger, leading to a trial balance and, eventually, the financial statements for an enterprise.
Types of Bookkeepers
DIY: Some business owners wish to take charge of their bookkeeping responsibilities. However, it can prove time-consuming, and you must weigh the pros and cons of employing a Bookkeeper or hiring external services versus doing it all by yourself, even if you are organised and good with numbers.
In-House Professionals: Depending on what the business needs in terms of bookkeeping and budgetary considerations, business owners may employ one or more in-house Bookkeepers in part- or full-time capacity or on a contractual basis. The tradeoff is often between saving time for other responsibilities and spending money on remunerating additional staff.
Bookkeeping Software: A mid-way solution for many business owners is to find and use suitable bookkeeping software solutions, such as QuickBooks, and gain access to simple and professional tools to manage your bookkeeping yourself.
Remote or Virtual Bookkeepers: Another option is to hire professionals who render their expert bookkeeping services remotely or virtually. For instance, QuickBooks Live Bookkeeping puts you in touch with online Bookkeepers who help assess your finances, file taxes, or generate monthly reports.
Cloud-Based Bookkeeping
Desktop accounting is in common use by businesses to record and monitor daily transactions. What cloud-based accounting does is transfer the process and data to the cloud for enhanced security and flexibility of access. Desktop bookkeeping software limits operations to where a computer is physically installed. Furthermore, desktop storage may put a cap on applications and frequent software updates are typically required. Cloud accounting or bookkeeping software removes the need for a physical application that must be installed and allows multiple log-ins into the software from any device that is online. Real-time updates keep the software current, and programs with an open API (application programming interface) can integrate easily with third-party software.
Current Scenario
Technological advancements in bookkeeping software that automate various routine tasks are expected to reduce the demand for traditional Bookkeepers over the next few years. Instead of performing manual data entry, Bookkeepers may take on more analytical and advisory roles focusing on examining the books of their employers or clients and identifying potential areas in which to boost efficiency. However, despite the projected decline in employment, expected openings will likely result from the need to replace workers who change careers or leave the workforce for various reasons, such as retirement.
Potential Pros & Cons of Freelancing vs Full-Time Employment
Freelancing Bookkeepers have more flexible work schedules and locations. They fully own the business and can select their projects and clients. However, they experience inconsistent work and cash flow, which means more responsibility, effort and risk.
On the other hand, full-time Bookkeepers have company-sponsored health benefits, insurance, and retirement plans. They have job security with a fixed, reliable source of income and guidance from their bosses. Yet, they may experience boredom due to a lack of flexibility, ownership, and variety.
When deciding between freelancing or being a full-time employee, consider the pros and cons to see what works best for you.