How Your Bookkeeper Helps You Understand Accounting Better

An alligator and a crocodile may seem very similar. I know they differ, but I couldn’t make a five-minute presentation about it. I bet most folks feel the same way about accountants and bookkeepers. They know their roles are distinct, but articulating just how could be challenging.

Although accountants and bookkeepers work together towards a common goal, their roles can vary. Bookkeeping is much more transactional and administrative; their role is centered around recording financial transactions. An accountant’s role is more concerned with the bigger picture and what can be gleaned from the bookkeeping data. Accounting can be subjective, especially when interpreting the tax code and a company’s financial health.



Your Bookkeeper’s Role

The main function of your bookkeeper is to ensure that your financial transactions are recorded accurately and timely – from monthly transactions to recording payments and paid invoices. Your financial reports are generated from the recorded data. Since your reports can be used to file taxes and to understand the health of your business, ensuring accuracy is vital.

Here are some typical tasks your bookkeeper will do on your behalf:

  • Recording financial transactions

  • Prepare and manage invoices

  • Run payroll

  • Generate financial statements (profit and loss, balance sheet, and statement of cash flows)

  • Maintaining and balancing subsidiaries, general ledgers, and historical accounts

  • Assist in paying vendors




Your Accountant’s Role

Every accountant's major task is preparing and filing a business owner’s taxes. In addition to filing your taxes, you should be able to rely on your accountant to help turn the bookkeeping data and reports into insights that give you a better, big picture understanding of your business. Your accountant is also someone that can help guide you through various phases or milestones, like an explosion of growth or hiring your first employee.

Here are some typical responsibilities that your accountant assumes:

  • Drafting and filing income tax returns

  • Reviewing company financial statements

  • Helping the business owner understand the financial impact of business decisions

  • Analyzing operational costs

  • Tax planning and strategizing

  • Preparing adjusting entries (expenses that have occurred but aren’t yet recorded in the books). 


 

While your bookkeeper can play an educational role in your business, like helping you understand how to read a profit and loss statement, their main function is to manage the transactions and data that will offer you insight. Hiring a bookkeeper will ensure your data is accurate so your accountant can help you analyze it. 

 

How to get better at understanding accounting?

Anyone can understand accounting. While the various service providers your company hires can give you insights into your own company’s finances, that doesn’t mean you’ll also get a crash course on accounting fundamentals.

In the same way your hairdresser can give you a consultation on the kind of care your hair requires, your bookkeeper and accountant can weigh in on the various accounting needs your company has based on its current position.

If you’re a filmmaker that has a creative agency and a brand hires you to create a campaign. Part of your job is to help the client understand the campaign’s impact – it could increase sales, visibility or both. But if your client wanted to understand filmmaking fundamentals better, they’d need to seek out additional educational sources. Of course, great service providers will educate their clients, but within the limits of what’s necessary and reasonable.

So, if you want to get a better understanding of accounting fundamentals, I’d suggest spending some time seeking out solid educational resources. Community colleges typically offer introductory accounting courses. Other schools and educational programs specifically geared towards accounting are also available; for example, I took accounting at UCLA Extension to get an accounting refresher. If you’re like me, you might pick up a stack of books to get good foundational knowledge. Of course, you can also find accountants that love educating online.

An excellent bookkeeper will ensure your accounting records are accurate, timely, and organized. This directly impacts your accountant’s ability to provide insight and create a financial strategy that ensures your business's long-term health and success.


If your creative agency is looking for better bookkeeping data, hit us up! We’re happy to help.

Paco de Leon