Most people would be hard-pressed to explain the difference between bookkeeping and accounting. In fact, "bookkeeper" and "accountant" are often used interchangeably to refer to most professionals within the finance and accounting function by people who are unfamiliar with the day-to-day responsibilities and skills required of each role.
It's easy to see why: both work with an organization's finance information; both are concerned with keeping accurate records and both have insight into a company's cash flow. There's a lot of overlap when it comes to the language that's used to describe both roles and their relationship to the financial health of a company. However, while bookkeepers and accountants share common goals, their roles support your organization in different stages of the financial cycle. There is a difference between bookkeeping services and accounting processes — and the professional bookkeeping and accounting role — and I'm going to use this post to demystify that for you. Let's jump in:
The Bookkeeping Function
Bookkeeping is the process of recording daily transactions in an accurate and timely fashion and is a key component to building a financially successful business. In general, bookkeeping is comprised of the following:
Recording daily transactions
Categorizing financial transactions
Posting debits and credits
Maintaining general ledgers
The complexity of a bookkeeping system often depends on the size of the business and the number of transactions that are completed daily, weekly and monthly. All sales and purchases made by a business need to be recorded in the general ledger, and certain items require supporting documents to be retained and preferably stored as an attachment to the transaction and its history.
One major difference between a bookkeeper and an accountant is the path they'll take to their respective positions —that is, the amount of formal postsecondary education, certifications and licensures needed to stay compliant and do the work. Unlike accountants, bookkeepers aren't technically required to have any postsecondary formal training to handle an organization's books. If you know a small business owner, for instance, you likely also know a bookkeeper; mom-and-pop shops often handle the books themselves until tax time comes around.
The amount of training a bookkeeper needs really depends on what an employer (and overall labor market) determines they need. Typically, that looks like an associate degree in accounting or a related field, though it can be higher. Bookkeepers can also pursue two industry-standard certifications to demonstrate competency:
Certified Bookkeeper (CB)
Certifying Body: American Institute of Professional Bookkeepers (AIPB)
Pass four-part national certification exam
Submit evidence of two years' full-time employment as a bookkeeper OR
Submit evidence of three thousand hours of freelance or part-time bookkeeping experience
Sign AIPB's code of ethics
Certified Public Bookkeeper (CPB)
Certifying Body: National Association of Certified Public Bookkeepers (NACPB)
Take NACPB's pre-assessment for their Accounting Fundamentals course
Take Accounting Fundamentals course
Take the Accounting Fundamentals post-assessment
Pass the Bookkeeping Certification exam
The Accounting Function (and How it Differs from Bookkeeping)
Accounting is a high-level process that uses financial information compiled by a bookkeeper or business owner and produces financial models using that information. The process of accounting is more subjective than bookkeeping, which is largely transactional. Accounting is comprised of:
Completing income tax returns
Preparing adjusting entries
Preparing financial statements
Analyzing costs of operations
Completing tax filings
Conducting financial research
Analyzing financial data
Performing month-end close
The process of accounting provides reports that bring key financial indicators together. The result is a better understanding of actual profitability and an awareness of cash flow in the business. Accounting turns the information from the ledger into statements that reveal the bigger picture of the business, and the path the company is progressing on. Organizations often look to accountants for help with strategic tax planning and analysis, financial forecasting and budgeting, and tax filing.
When we're drawing a comparison between bookkeepers and accountants, it's important to point out that any professional that files a financial report with the Securities and Exchange Commission (SEC) — something most companies will have to do at some point, if not regularly — is required by law to be a licensed Certified Public Accountant (CPA).
So right off the bat, we see that the training and education required to obtain accreditation or licensure is just more stringent for a professional accountant vs. a bookkeeper. At all levels of professional accountancy certification, you'll find that aspiring accountants need a bachelor's degree at minimum, and many will pursue a master's degree to streamline the process for certification and licensure, since the 150 hours of coursework required represent 30 hours more than a standard bachelor's degree. Though there are a few types of specialized certifications for auditors and financial analysts, by far the most in-demand and well-known way for accountants to get their bona fides is by obtaining a Certified Professional Accountant Licensure.
Certified Public Accountant (CPA)
Certifying Body: State Board of Accountancy (Varies)
Be 18 years of age or older
Attain a bachelor's degree (accounting or business recommended but not required)
Obtain 150 credit hours of coursework
Demonstrate two thousand hours or more of professional accounting experience
Pass the four-part American Institute of Certified Public Accountants (AICPA)'s Uniform CPA Examination
Maintain licensure via continuing professional education (CPE) credits
Full licensure requirements may vary by state
Is a Bookkeeper an Accountant?No, they're not the same thing. Here's what you need to know:The bookkeeper's role is primarily transactional and administrative. These resources are concerned with accurately recording financial transactions in a timely manner.The accountant's role is high level and more subjective, providing an organization with business insights based on the data gathered from the bookkeeper’s ledgers.
How Much Do Bookkeepers and Accountants Charge?
There is a sizable difference in the average compensation for bookkeepers vs. accountants, and that gap is going to naturally grow or shrink depending on where your organization is located and the health of the talent market you have access to.
There are a lot of factors that determine what it will cost an organization to hire either type of professional — geography, background and experience can all play a part. But let’s take a look at some national averages to get a general idea:
Cost of Hiring a Bookkeeper
Let’s start with bookkeepers. According to the Bureau of Labor’s most recent statistics, bookkeeper salaries range from $29,120 to $61,980 annually.
We actually did a little math of our own on bookkeeper hiring costs to help make it a little easier for clients to determine their cost savings with virtual accounting. Here’s what we came up with, which includes the average employee burden cost* businesses can plan to spend once they bring someone onboard:
$43,748 (bookkeeper salary) + $13,124 (employee burden) = $56,872
Cost of Hiring an Accountant
Accountants, on the other hand, can command anywhere from $73,500 to $95,500 depending on the credentials they hold and how long they’ve been in the profession, according to the BoL. The type of accounting they do can also play a role — a tax accountant might make more than a treasury accountant, for instance — but overall that aligns with our calculations, too:
$73,500 (accountant salary) + $22,050 (employee burden) = $95,550
*Employee burden is the average estimate of indirect labor-related spend including benefits, perks and payroll costs. We estimate this at 30%. If you cost differs, fill it out in the box above.
To get a much better idea of how much accountants cost and how much bookkeepers charge where you do business, I recommend using the accounting cost calculator we developed here at Personiv to help finance leaders get a clearer picture of employee costs in their geographic region. Check it out or look at our pricing page for more specific salary figures across the accounting function where you are.
A Bookkeeper vs. An Accountant - Difference Between Bookkeeping and Accounting
As technology progresses and financial platforms become more advanced, some components of the accounting process have been absorbed into the bookkeeping process. For example, bookkeeping software is typically capable of building financial statements—blurring some of the traditional lines between the bookkeeping and accounting processes and making end-to-end finance and accounting possible.
Understanding the difference between bookkeeping and accounting is important for organizations. Transactional processes are time-consuming and add little value to the business. These processes, if not managed properly can quickly bog down an organization and lead to high turnover, resulting in an F&A department that has little time to add value to the business. It is also important to understand the kinds of credentials accountants and bookkeepers have in order to determine how or when to use each.
Typically, bookkeepers are required to have between two and four years of experience or an associate’s degree. To be successful in their work, bookkeepers need to be sticklers for detail and accuracy, and knowledgeable about key financial topics that impact the processes for which they are responsible, such as accounts receivable. Usually, the bookkeeper’s work is extremely repetitive in nature, which can lead to an unmanageable turnover if these resources aren’t provided opportunities for value-added work as their career progresses. These roles are oftentimes easily scripted and make prime candidates for outsourcing.
To qualify for the title of accountant, generally, an individual must have a bachelor’s degree in accounting. For those that don’t have a specific degree in accounting, finance degrees are often considered an adequate substitute. Accountants, unlike bookkeepers, are also eligible to acquire additional professional certifications. For example, accountants with sufficient experience and education can obtain the title of Certified Public Accountant (CPA), one of the most common types of accounting designations. To become a CPA, an accountant must pass the Uniform Certified Public Accountant exam and possess experience as a professional accountant.
Bringing it all Together: Understanding the Difference Between Bookkeeping and Accounting
Organized financial records and properly balanced finances produced by the bookkeeper, coupled with smart financial strategy and accurate financial reports and tax filings by the accountant, contribute directly to the long-term success of every business.
Some business organizations choose to manage their finances on their own, while others opt to hire a service provider so that they can focus on the parts of their business that are core to their overall strategy.
Personiv can help alleviate your organization of its transactional processes and help support your knowledge-based accounting processes. We utilize hand-picked, college-educated resources with accounting degrees and relevant experience. Our Manila resources are all trained in generally accepted accounting principles (GAAP), the same principles we use here in the U.S., and many have CPAs. Take a look at what makes our Manila team so special with our special report on outsourcing accounting to the Philippines, where you can get to know some of the actual accounting professionals working for organizations just like yours. Our Manila office was even named a "Best Place to Work" overseas, which helps us attract the best bookkeepers and amazing accountants the talent market has to offer. Whether you’re trying to outsource your entire accounts payable function, or provide support for your most strategic accounting processes, Personiv is here to help.
Your next steps:
See if any of your organization's accounting processes or bookkeeping tasks are good candidates for offshore delegation with our Definitive Finance and Accounting Decision Matrix
Crunch the numbers and see how much outsourced accounting or bookkeeping can save your organization in 2023 and beyond with our Outsourced Savings Calculator
Compare your options for virtual and offshore accounting providers with our Vendor Comparison Spreadsheet
See why Manila is an ideal destination for virtual accounting and review actual CV snapshots of the top-notch accounting professionals Personiv attracts with the Destination Manila culture sheet and report
Contact one of our virtual accounting experts by visiting our Contact Us page
About the AuthorFollow on Linkedin More Content by Megan Weis, CPA, MBA