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  • Accounting for Your Startup
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    Bookkeeping Versus Accounting

    Bookkeepers and accountants occupy a continuum beginning with recording financial transactions and continuing through categorization, preparation of specialized reports, and financial analysis. In general, the bookkeeper’s job is limited to recording transactions, while an accountant does the rest.

    Credentials and Job Functions
    Smaller businesses may employ “full-charge bookkeepers” who also categorize the data they enter and sometimes prepare financial statements. Larger businesses often call their bookkeepers “accounting clerks;” these may be specialized by the types of data they enter—for example, accounts receivable or accounts payable.

    A qualified accountant will generally have a BA degree in accounting, or a business-focused major with a minor in accounting. The top credential for accountants in the U.S. is the Certified Public Accountant (CPA) designation. Bookkeepers can also obtain certification through the American Institute of Professional Bookkeepers (AIPB).

    On his Accounting Coach website, Harold Averkamp explains that, “The accountant…takes over where the bookkeeper leaves off. The accountant will prepare adjusting entries to record expenses that occurred but are not yet entered by the bookkeeper.” These adjusting entries are more complicated calculations such as depreciation, pending interest on bank loans, and allowances for uncollectible accounts.

    Accountants also prepare financial statements, as described in The Playbook, and advise business owners on strategic opportunities (and threats) based on their financial picture

    Making the Choice for Your Business
    Because accountants charge more than bookkeepers, most emerging businesses typically can’t afford to engage an accountant on a full-time basis. However, using an accountant for tax preparation can sometimes pay for itself in the form of lower tax bills. And having a professional on your side provides a level of confidence that you are managing potential enterprise risks that could arise from mistakes on your tax return. Your tax accountant will probably also be willing to provide advice on specific issues as they come up.

    Thanks to the accessibility of today’s accounting software packages, start-up businesses may not even need to hire a bookkeeper. Data entry is not complicated, but it is an ongoing time commitment. You need to keep your books up to date to ensure that your cash flow stays positive. Hiring a part-time bookkeeper may be a wise investment for under-staffed entrepreneurs working overtime to get a new business off the ground.

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