Remember the old days when you could roll up to the local gas station and the attendant would not only pump your gas but also ask you to pop the hood, check your oil, and then wash your windshield? Ok, the Millennials out there are going, “Uh, no!”, but that’s what would happen at many local gas stations until the mid-90s, at least in New England. If you were a local, you knew the attendant’s name, Tom, and he would ask about your life, wife, kids, etc while the gas was pumping. Oh, and yes, you would provide a tip for his extra attention.
Occasionally, Tom would notice that your sticker was coming up or that your oil was looking a bit dark and recommend an oil change or set up an appointment for inspection. He’d help you keep on top of your maintenance, not that you couldn’t see these things yourself, but just an extra set of eyes. He might also note that your belts looked frayed, your driver’s side rear tire looked a bit low, or other fluids were low. He may hear an odd sound you never noticed over the radio or a smell that only was noticeable with the hood open. Tom had your back.
On Tom’s suggestion, you would also bring your car to the same garage for routine work, tune-ups, inspections, etc. The mechanic, Joe, was always thorough, reliable, and honest; you trust him, but you know he doesn’t know you as Tom does. You didn’t see him all the time, but you know Tom has a good eye and ear and Joe will take care of you.
Your business finances are the same: your bookkeeper is the attendant. They have an ear under your hood, listening for problems, they are checking the fluids, filling as needed, pumping your gas, kicking your tires, washing your windshield, and asking about your daughter’s dance recital. They also know when you need to see your mechanic …er, accountant. That’s the difference between an accountant and a bookkeeper; the bookkeeper is all about the day-to-day finances of your business and helping to track the dollars and cents, organize it all, one transaction at a time, and keep an eye on your trends to let you know if something needs to be addressed.
Your accountant sees your business finances at a higher level or can drill down when there is an issue. Where a bookkeeper deals in each days’ transactions, an accountant looks at months or even years at a time. They are big picture focused while your bookkeeper is focused on other day-to-day concerns (will you have enough in your account to cover next week’s bills, for example). In truth, you need both. Your bookkeeper is not only doing the busy work of your books, but they are also keeping an eye out for problems before they happen and helping you avoid pitfalls. They are prepping your books for your accountant to review at year-end. They may even be a go-between with your accountant if you have questions. They help control your spending, assist in navigating dips in income and track other important data.
Everyone knows they need an accountant, and few business owners have the time or inclination to do their taxes, let alone do them correctly. So why do they manage their books which require more time, more specific knowledge, and are very easy to do incorrectly? Every business needs a bookkeeper, too!