Roy A. Ackerman
What does one need? A bookkeeper or an accountant? I’m often asked that query. And, the answer, biased as I am, is “it depends”.
Let’s first explain that there are differences… Big ones. A bookkeeper is basically someone who enters your financial data into a system. The system can be a spreadsheet, an accounting ledger (if you are bound and determined to keep your records by hand), or an accounting program. The data is entered, the “books are kept”, and records are available for review.
An accountant starts with the reports (one generally assumes the books are accurate) and performs analysis to provide advice to the “management”. Some business entities have accountants perform audits, which means that the veracity of the books are challenged to insure their integrity. (It does NOT mean that management assumes the books are in error, but wishes to assure their stockholders and others that their actions are above reproach.)
A financial advisor is one who shares his or her business acumen with management and helps grow the business, based upon the goals and desires of the entity, using the information provided by the “books”. The financial advisor may also work with management to develop cash flow systems to take advantage of the “ebbs and flows” of the business, to determine tax-advantaged choices the business can make, and to grow or divest various aspects of the business. The efforts of the financial advisor goes beyond that of the accountant and certainly the bookkeeper.
Not surprisingly, the costs (in general, not in all cases) escalate with the skills and advice proferred by these professionals. One should consider, at a minimum, the use of an accountant or financial advisor before the business begins and with quarterly or semi-annual reviews for the first few years. The need for a bookkeeper is constant- whether it’s the entrepreneur, a paid employee, or an outside agency. Someone must keep the records of the firm- at the very least to keep the Internal Revenue Service from shutting down the enterprise. (Having no records is cause for fines, penalties, and offers the IRS the opportunity to close the enterprise.)
There are some firms (The Adjuvancy, of course!) that can provide all three sets of skills for your enterprise. Others provide one specialized skill for your use. It does not make one entity better or worse than another- just whether one entity can satisfy some or all of your needs. (To be honest, the Adjuvancy goes for the “wow” factor…)
I thought they were synonyms for each other… LOL!
Thanks for pointing out the difference. Makes so much sense now! 🙂
Hajra recently posted..How much is Honesty Worth?
Sometimes, an accountant and a financial advisor are antonyms, Hajra!!!
Good tips. This is my weak area and I hate myself every time I have to deal with the books. But I’m to cheap to pay someone. When I become a rich girl I’ll talk with you.
shawn recently posted..The Virtual Assistant Cry
So, you knew I would say this, Shawn…
Penny wise and pound foolish.
You would be amazed at the money you would save (in operations and tax considerations) when you consult with us (or folks who could approach our breadth of knowledge and customization)…
Thanks for the comment…
Great breakdown to explain the difference. I don’t use any of these services at the moment but when I was working, I did use a financial advisor. When I get myself back on my feet, I will keep you in mind Roy.
Thanks
Cindy Murphy recently posted..Day 12 – How To Finish the year off with a BIG Bang!
Glad to see that you understand the differences, Cindy…Not only for selfish reasons do I wish your business growth merit the needs of an advisor!
So this is why I rarely ever hear about bookkeeping. Personally, I would benefit from a financial advisor now that I fully understand what advisors do. I prefer working with people who can see the big picture because their advice is so much more thorough!
Samantha Bangayan recently posted..Avoiding Danger in Peru
Oh, bookkeepers are in high demand, Samantha. Many very small firms outsource the effort, larger ones employ them. It’s the analysis of the numbers- what they mean, what they portend, and how to make the most of what you have- those are the skills that help companies grow and thrive.
Thanks for the visit and the comment.
It’s nice to see an appropriate breakdown on financial assistants and what they do to fulfill their roles. The number of people who think ‘bookkeepers’ and ‘accountants’ are interchangeable words is far too high.
Patrick Sevenoaks recently posted..HM Revenue & Customs re-launches Business Records Checks
So nice to meet you, Patrick! Thanks for adding to the conversation.