Career Advice: Accounting Vs. Bookkeeping
Accounting and bookkeeping’s distinctions are subtle yet essential to understand when considering a career in either field. Bookkeepers record the day-to-day financial transactions of a business. There are a lot of minutiae involved, and keen attention to detail is paramount. Accountants, by contrast, focus more on the big picture. At specified intervals, they review and analyse the financial information recorded by bookkeepers and use it to conduct audits, generate financial statements and forecast future business needs.
The two careers are similar, and accountants and bookkeepers often work side by side. These careers require many of the same skills and attributes. However, significant differences exist, like work conducted in each trade and what is needed to succeed. The following analysis compares the education requirements, skills required, typical starting salaries and job outlooks for accounting and bookkeeping.
- Although they are job titles used interchangeably, bookkeepers and accountants are different positions with different requirements.
- Bookkeeping is where accountants generally start their careers as the entry barriers are lower, and pay is decent.
- Though not formally required to do so, accountants traditionally acquire their CPA certification and their Master’s degrees.
- Bookkeepers can be considered to line up all the small pieces into a place where accountants view and arrange those pieces.
Neither accounting nor bookkeeping imposes hard-and-fast educational requirements. You can find plenty of bookkeepers and even some accountants who have no further education than a high school diploma. Unlike careers such as law and medicine, state licensing boards determine how much education you need. With accounting and bookkeeping, the companies doing the hiring decide what to require of candidates.
That said, landing an accounting job requires, in most cases, more education than becoming a bookkeeper. In the 21st century, most accountants hold bachelor’s degrees. Many have advanced degrees, such as MBAs with accounting or finance concentrations, or Master of Accountancy degrees. To sit for the Certified Public Accountant, or CPA exam, which is a common goal of many accountants, you must have a minimum of 150 postsecondary education hours. This is a bachelor’s degree plus 30 hours of graduate work; most CPA candidates go ahead and finish their master’s degrees.
You can become a bookkeeper right out of high school if you prove you are good with numbers and have strong attention to detail. Many aspiring accountants work as bookkeepers to get a foot in the door while still in school. Additionally, bookkeepers who excel at their jobs are sometimes promoted to accounting positions, even if they lack the level of education the company typically prefers.
Accountants and bookkeepers work with numbers all day long. Therefore, those who do not like math get confused easily when making simple calculations or are generally opposed to number crunching should not apply.
Speaking of number crunching, that job duty is more common to bookkeeping than to accounting. Companies task bookkeepers with tasks such as recording journal entries and conducting bank reconciliations. As a bookkeeper, your attention to detail must be almost unnatural. Careless mistakes that seem inconsequential at the time can lead to bigger, costlier, more time-consuming problems down the road. You must be able to multitask. Rarely does a bookkeeper work on one big project for an eight-hour shift; instead, a typical workday involves juggling five or six smaller jobs.
As an accountant, you also have to crunch numbers, but it is much more essential to possess sharp logic skills and big-picture, problem-solving abilities. While bookkeepers make sure the small pieces fit correctly, accountants use those small pieces to draw much more significant and broader conclusions.
Both careers, accounting in particular, cover a broad gamut of starting salaries. How much you make as a first-year accountant depends mainly on the specific career path you pursue. While accounting can be a lucrative long-term career, most accountants, unlike corporate attorneys or investment bankers, do not command huge salaries during the first few years.
Public accounting generally pays the most to a candidate right out of school. In particular, the Big Four firms of Ernst & Young, Deloitte, KPMG, and PricewaterhouseCoopers offer larger salaries than mid-size and small firms. Depending on the city, you can expect to earn between $50,000 and $60,000 your first year as a Big Four accountant.
Mid-size and small public accounting firms pay, on average, about 10% less than the Big Four. If you choose to work for a company internally instead of doing public accounting, the starting salary range is very broad.2 In most cases, private companies do not pay more than the Big Four for young accountants with little experience.
Bookkeepers often get paid hourly wages rather than annual salaries. The average salary for someone new to the business is around $19-20 per hour. This is the equivalent of about $40,000 per year, assuming a 40-hour workweek.3
The advantage of hourly pay is you receive 1.5 times your average wage for hours worked more than 40 per week. In bookkeeping, extra hours are typical during the busy season of January to April.
Like most fields, accounting and bookkeeping suffered contraction during The Great Recession. However, they have recovered nicely, with economists forecasting job growth of 13% through 2022 for the broader field of accounting, including bookkeeping.4 This is slightly higher than the overall growth rate that considers all fields.
Bookkeeping faces a specific challenge similar to switchboard operating, word processing and other fields in which software programs can perform many jobs humans once did. While technology has reduced the demand for workers to conduct the most trivial bookkeeping tasks, it has also increased the need for more skilled workers who can efficiently operate this technology while offering benefits programs.
Which One to Choose?
For a long-term career, accounting offers much more upward mobility and income potential. The education required to be competitive in the field is more excellent, but the payoff down the road can be considerably higher. That said, bookkeeping is a great starting point if you are interested in the field but not fully committed and want to test the waters.
You may also be an ideal bookkeeping candidate if you want an excellent job with a respectable wage and decent security but may not be looking for a long-term career. Bookkeeping offers much lower entry barriers, and the competition you face in the job search is less fierce.
Six signs you are having bookkeeping and accounting issues
Successful small business owners are great at what they do. The clients are happy, and work keeps pouring in. But often, in the world of money, things aren’t so rosy.
That’s because lots of small business owners have a horror of bookkeeping – and it’s holding their business back. Here are six tell-tale signs you may be suffering from bookkeeping phobia and what to do about them.
You’ve got loads of work—but no money in the bank.
Is it because you haven’t been paid? Is it because you’re spending too much? Is it because you haven’t invoiced? Cash flow is the bane of many growing businesses. To keep afloat and fund expansion, you need cash to invest, as generally, you don’t get paid until the job is done. Without proper cash flow management, it can be challenging to fund the next project and keep the business growing, especially if you need to make regular loan repayments.
What you can do: By keeping a cash book, or equivalent, to track payments into and out of your bank account, you can save on top of cash flow, helping you understand where your bookkeeping needs more attention. And a well-tended cashbook can become a forecasting tool rather than just a historical record.
You keep finding receipts in strange places.
They’re on your desk, in your wallet, in your pockets and the glove box of the car. You’ve no idea which are in the hundreds and which are for a few bucks. But without ordering and recording your receipts, you don’t know how much tax you are likely to owe and what tariff you can claim back. That’s important when forecasting how much cash will be in the business in the future. The problem is, receipts are usually on paper, and you might be out of the office when you get them. Once they start to stack up, they become a problem, and procrastination sets in. “Tackle the receipts? No, I have more important things to do!”
You can do this: Regular attention to receipts and keeping a digital record can help the business run smoothly and avoid unnerving hiccups in cash flow.
Invoicing is way down your priority list.
You’re great at your job, and you’re busy. You trust your clients, and you want to keep the relationship sweet. So invoicing isn’t always at the top of the list. And when it’s not, you can forget to do it. When you do an invoice, you struggle to keep tabs on how many are outstanding and which ones have been paid. It’ll look bad if you chase up a client for an invoice that’s settled, but it’s worse for your business if you leave them unpaid altogether.
What you can do: Understanding where you are with invoices will help you know how much cash you’ll receive in the coming months and how much work you need to win to keep thriving. Don’t think of invoices as a burden, but rather as the tiller that steers the ship.
You can’t find your bank statements.
If you don’t like nasty surprises, losing bank statements is asking for trouble. Being vigilant over the state of the bank account is a prime responsibility of small business owners. It helps combat the risk of fraud and mistakes by your bank. But reviewing statements regularly will also help you better understand where you’re spending money, when you’re earning it, and how the business is performing overall.
What you can do: With electronic banking, you don’t need to wait until the end of the month to know where you are. Ultimately, if you keep your banking under control and never breach your credit limit, you stand a much better chance of getting finance when expanding the business.
Your spreadsheets are too complicated.
OK, so you feel good about controlling your business on the computer. On spreadsheets, no less. Are you organised, right? Well, maybe. Spreadsheets need to be carefully constructed to do the job you need them to do. For effective financial management, you need to join up different aspects of your business: tenders, sales, invoices, cash flow and banking. That can mean quite a few formulae. Mistakes are easy to make but hard to see. Continually keying in data also makes spreadsheets prone to error.
What you can do: Moving your business management to spreadsheets can just lead to a better-looking mess, so investigate more intuitive tools to help you with your bookkeeping.
You “don’t have time” for bookkeeping.
The final sign you might be suffering from bookkeeping phobia is telling yourself you never have time for it. Your business is too successful, and you’re too busy. Besides, you didn’t go into business to become a bean-counter.
What you can do: Remember that making time for bookkeeping will save you time in the long run—less time spent digging out and adding up receipts. Less time spent chasing up invoices and less time spent juggling cash flow. Finally, being proactive will free up time to do more of the work you love.
Bookkeeping might not be the reason you went into business, but it will help you make a success of it. Luckily, there’s help at hand to make bookkeeping easy, quick, and—dare we say it—even enjoyable.
Accounting Advice In Melbourne – Select Reliable Accounting Services For Small Businesses
Accounting is one of the most significant aspects of large or small businesses requiring both regular attention and consideration. Getting Accounting Advice in Melbourne from the experts will ease both starting and operating your business. When you commence with a company, most of the attention is diverted to designing a sound business card, interacting with the customers, promoting your new business, selecting an attractive name and many other things that seem obvious.
Here, you need to understand that without a solid understanding of the figures, you will not be able to survive long in the industry. If you look at some unsuccessful entrepreneurs, you will find that most of them saw a downfall because they ignored their businesses’ financial side. This made them realise too late that they were making a loss more than a profit. Thus, the first Accounting Advice in Melbourne is that without a solid grasp of your expenses & cash flow, you might discover yourself to be standing out of the market very soon.
At first, it may be easy for you to enter & maintain your business’s accounting system. Still, as it grows or you need to look after other aspects of your business, you would require an accountant or contact a reliable accounting service. One of the questions that arise in mind is that since you have a small business or just a start-up, should you hire an accountant or look for a bookkeeping service? Here you need expert Accounting Advice in Melbourne.
Each start-up and its condition are different, but generally, start-ups hire the services of a bookkeeper. A bookkeeper’s assistance will help you start with a sound accounting system and help you stay organised while handling financial transactions and creating financial statements. In the very beginning, when you start a business, it becomes tough to understand what & how to keep a record, especially if you’re not from an accounting background.
Even though large business owners appoint bookkeeping services these days, considering online Accounting Advice in Melbourne, experts think that if things get complicated and a lot of employees are added to the team, it is better to have an in-house accountant for the firm. To start with and maintain the expenses to the minimum, you might establish your business from home or do your business part-time.
In the above circumstances, hiring an employee or bookkeeping services will not be feasible. You can either perform the bookkeeping yourself or appoint a professional from time to time for getting records managed. If you can work all the year round, an Accounting Advice in Melbourne is that you can employ an accountant’s services to plan your year-end tax.
Understand the difference between bookkeeping and accounting
When you started your small business, you must have heard both accounting and bookkeeping from time to time. Here, you should know and understand that both of these terms do not mean the same thing. Small businesses have both accounting and bookkeeping functions, and they are related to each other. Balanced finances & systematic financial records are the most significant aspects required for small businesses success and accomplishment.
If you are a small business owner, the following is simple Accounting Advice in Melbourne for you. You should know and understand the system of bookkeeping & accounting in your company. You have to keep in mind that bookkeeping can be prepared on a spreadsheet, and one of the most delicate things that a bookkeeper can proffer is accuracy & completeness. However, as far as ‘accounting’ is concerned, it can be done only by licensed professionals. In most cases, the bookkeeping clerks operate under a professional accountant.
Which accounting technique is right for your business?
If you are running a business, you will have to learn the art of basic bookkeeping or employ a bookkeeper who can do the job on your behalf. Since there are two main types of the accounting system, you require proper Accounting Advice in Melbourne to opt for the right one for your business. Analysing your accounting requirement, the number of employees you have under you, along with the area to which your business is expanded currently, matter a lot when you’re going to decide on a suitable accounting system. In any case, you have to keep accurate records for your planning and budgeting system and the filing of reports & returns.
Proper handling of the accounting department is obligatory for any business to prosper. This option provides convenience and guaranteed know-how on the task at hand. An accounting company with a fair market value, overall experience, and matching core principles may just be your shot at receiving excellent Accounting Advice in Melbourne and claiming your future success.