Accountant vs Bookkeeper, What's the Difference?

You have just filed your taxes and found what appears to be conflicts within the system, the terminology and ‘who’s who’.

Do you need a bookkeeper, accountant, or CPA? What is the difference and should I think as many do and ask: “I want to save money so I won’t use a CPA.” 

​Is this in your best interest? Possibly.

“We are fine with our part-time bookkeeper as an employee, where I am in control.” There is some truth to this, there are risks and missed opportunities.
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We are going to review the basic difference between an accountant and a bookkeeper and a look at ‘employee’ vs ‘contractor’. Hopefully you will learn something new to make the necessary changes to preserve your cash and protect your business. You may find this information helpful in making new decisions regarding hiring an employee or reaching out to us to talk about how to remove a few headaches.

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​Bookkeeper and Accountant Defined

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Accountant

​The duties of an accountant include organizing or establishing a system of records or investigating and reporting on the financial state of an organization.
 
The accountant’s services are professional by nature and more complex than those of the bookkeeper. Certified public accountants (CPA) must meet additional State education and experience requirements for certification as a CPA.
 
A CPA’s primary functions are financial audit services and public accounting.

Bookkeeper
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A bookkeeper’s duties usually include balancing books, compiling reports, maintaining a complete and systematic set of records of the employer's business transactions, posting ledgers, and recording items in proper journals and on special forms.
 
Skilled bookkeepers may perform the duties of accountants and accountants may often perform bookkeeper duties.

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Employee Status of Bookkeepers and Accountants

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​Bookkeepers and accountants are employees when they:

• Are subject to direction and control of the employer, although they may not be closely supervised because they have the skill required to do the work
• Are usually connected with a system of bookkeeping or accounting adopted by the employer
• Do not make their services available to the public, or maintain their own offices
• Enjoy the usual privileges extended by an employer to employees, including paid vacations, sick pay benefits, bonuses, etc.
• Generally, work fixed hours
• Perform services at regular intervals for a single business for a fixed salary
• Work on the employer's premises with the necessary supplies and office the employer furnished for them (except when the employer authorizes the employee to work at an alternate duty station, such as from home)

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Status of bookkeepers and accountants as
independent contractors (outsourced onsite or online)

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Bookkeepers and accountants are independent contractors when they:

• Are hired (temporary or potentially for a long period of time) to accomplish a specific result and are not subject to direction or control over the methods or means to accomplish it
• Depend on their reputations and the amount of energy and resourcefulness they use to conduct their businesses
• Do not have to perform their services on the premises of the purchaser of the services
• Make their services available to the public
• Pay their own business expenses, including the cost of equipment and materials, helper's wages, etc.
• Render their services for a number of clients and receive remuneration on a fee basis
• Rent office space or maintain an office in their home

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Dual Status of Bookkeepers and Accountants

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​Quite often, the bookkeeper and accountant render services under conditions that are a combination of employee and independent contractor. For example, they may be an employee on one job and an independent contractor on another job.
 
A self-employed accountant may occasionally accept a job under conditions that make him or her an employee.

• For example, an accountant might agree to prepare monthly statements and reports for a storeowner at the store for two hours every week.

 
An employer-employee relationship exists if the storeowner:
·        sets the hours;
·        pays an hourly wage;
·        furnishes the necessary materials; and
·        changes or sets the order of the services.
 
Many bookkeepers and accountants who work 8-hour workdays as employees may also work for small firms on a contractual basis. They usually work at home, for a specified fee, and must complete the job by a certain time.
 
When hiring bookkeepers or accountants, it is important to understand these differences to avoid any misunderstandings. 

For instance, Accounting Solutions Partners provides services on a contractual basis onsite or in the cloud, not as an employee. It is possible that certain tasks and activities must happen during specific times of the day, week or month. An agreement can be made to ensure the work is completed in a timely manner without taking on the burden and responsibility of an employee.

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Principal Factors That Indicates an Employer-Employee Relationship

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The principal factors that indicate an employment relationship are:

• Either party may end the relationship without liability;
• The worker cannot integrate his or her work into another business;
• The worker does not personally incur business expenses;
• The recurring nature of the services;
• The alleged employer furnishes facilities and equipment (except when the employer authorizes the employee to work at an alternate duty station, such as from home); and
• The worker must personally perform the work.

 
The first point, referencing either party may end the relationship without liability, is not 100% accurate since there are potential consequences for the employer in regard to unemployment.
 
An employer has more ‘control’, but also incurs the expenses for supplies, safety, training, equipment, facilities, space, etc. 

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Consider the Nature of the Job to Determine Worker Status

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​As an employer, the nature of the worker’s job affects the degree of direction and control that is necessary to determine worker status.
 
For instance, highly trained professionals (accountants in particular) may require very little direction and control. When analyzing the status of professional workers, evidence of control or autonomy with respect to financial details is important, as is evidence concerning the relationship of the parties.
 
Examine the parties’ agreement and actions with respect to each other to determine the relationship of the parties. Pay close attention to the facts that show how the parties (and others) perceive the relationship.
 
The following facts may reflect the intent of the parties:

• Doing business in corporate form, while observing corporate formalities, indicates the worker is not an employee
• Filing a Form W-2, Wage and Tax Statement, indicates an employer’s belief that the worker is an employee
• Giving the contractor a Form 1099 indicates an employer’s belief that the worker is an independent contractor
  
• Providing employee benefits (such as paid vacation, sick days, and health insurance) is evidence that the worker is an employee

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Important

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This becomes important when thinking about whether to hire an “employee” or a company such as ASP. Hiring a bookkeeper as a “contractor” but treating them as an employee has come back to haunt many companies.
 
Because the role of an employee as a bookkeeper or accountant can become ambiguous when and where work is performed (this is especially true for employees who work both onsite and in their home), it leaves the employer open to fines, litigation and increases the potential for fraud.
 
We hear stories in the news of bookkeepers embezzling hundreds of thousands of dollars. Here is a recent story about a bookkeeper stealing $500,000 by falsifying the records.  In both cases, an audit, or adding a company like ASP on a part time basis would have limited the risk to avoid the pain. Hiring a bookkeeper or accountant as an employee is not a guarantee of being safe and secure.  
 
Take a look at the many bookkeeping services we offer. You might have questions or frustrations with payroll or payroll tax reporting. You may feel “We are always short cash” and need help with setting up and managing a system to improve your cash management. 
 
Regardless of what your goals or barriers to success happen to be, we have a long track record of working with companies with both bookkeeping and accounting.

​Contact Eric by phone or by email here to learn more.
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