When you think about the financial status of your business, accounting and bookkeeping are likely top of mind. In spite of both often being mentioned together, they are in fact two different functions. If you’re confused, you’re not alone. The difference between a virtual bookkeeper and an accountant is that a bookkeeper records, classifies, tracks transactions, and analyzes and summarizes the data. Bookkeepers are typically more in the trenches of everyday income and expenses within your business. An accountant often has a Bachelor’s Degree in Accounting or a CPA license and takes a deeper look at the data for auditing, corporate reporting, and tax planning purposes. Accountants are going to look at the bigger picture, while bookkeepers deal more with the day to day they both build on each other and need to work together.
What’s a virtual bookkeeper?
Bookkeeping is the process of tracking income and expenses on a regular basis. Typically this happens monthly when bank statements are available. Before the internet and digital banking, a bookkeeper would often work at the business. Now that accounting software and banking are online, we’re able to work from anywhere; hence the term virtual bookkeeper.
At KPI Bookkeeping, clients provide read-only access to their business banking, often simply by linking their accounts to their secure accounting software and providing me access. Most utilize QuickBooks. I then review, classify, and record transactions, and create financial reports so that I can analyze the data. I then communicate with my clients on a regular basis so they understand where their business stands financially. Knowing this information, they are better able to make employment, marketing, and other business-related decisions.
Profit and Loss, Balance Sheet, and Cash Flow reports are used to understand the financial health of the business in order to make business decisions. If there isn’t enough income to cover expenses, a business owner will need to review expenses to see where changes can be made as well as opportunities to create income. It’s also good to know if there is a surplus of cash that can be invested in new products or services, marketing, equipment, insurance, employees, etc. Each month I meet with clients via video calls to review reports.
The benefit of hiring a virtual bookkeeper is that we are tracking the financial health of the business on a consistent basis, providing monthly reports, so they can make adjustments to their business without having to bring in an employee.
In my article Lessons Learned from the Restaurant Industry, I discuss the reasons restaurants may choose to make weekly, rather than monthly or quarterly, changes based on financial reporting.
When bookkeeping ends is where accounting begins.
Accountants review reports prepared by bookkeepers and build on it. They may provide tax guidance, tax planning, auditing, business structure establishment (LLC, S-corp, etc.), auditing, corporate reporting, compliance with government and industry standards, and financial management advice. Accountants typically have a four-year degree in accounting and additional certifications in tax preparation such as Certified Public Accountants (CPA) and/or Enrolled Agents (EA).
Not sure who you need? Consider the industry, inventory, number of employees, products and services, and level of expertise. The more complicated the business, the greater likelihood that a bookkeeper and accountant are needed.
While some accounting firms offer bookkeeping services, they are, or should be, performed by two different professionals. The difference between a virtual bookkeeper and an accountant is knowledge, skills, and training. For most businesses, it makes sense to have both as part of the financial team.
KPI Bookkeeping in Phoenix is here to guide you through best practices for virtual bookkeeping and understanding what the reports mean for the future of your business. Call us today at 949-373-5534 to get started!
