The Difference Between Bookkeepers, Accountants and CFOs

Most people think bookkeeping and accounting are synonymous, and in many ways they are very similar. While bookkeepers and accountants work toward the same ends, their roles in supporting your business are very different when it comes to the accounting and financial cycle. Chief Financial Officers (CFOs) are not synonymous with either and are more of an extension used to manage the business strategically into the future. 

Bookkeeping is generally more of a transactional and administrative role, this role is more concerned with recording day to day financial transactions. Whereas Accounting is more subjective and focused on the overall consolidation of these transactions to give you a good business overview. The CFO uses all of this internal information coupled with external factors to create a strategic plan for the business. 

Here we will explain the functional differences between accounting and bookkeeping, as well as the differences between the roles of bookkeepers, accountants, and the chief financial officer. 

The function of bookkeeping
Bookkeeping is the process of recording daily transactions in a consistent way, and is a key component to building a financially successful business.
Bookkeeping is comprised of:

• Recording financial transactions
• Posting debits and credits
• Producing invoices
• Maintaining and balancing subsidiaries, general ledgers, and historical accounts
• Completing payroll

Maintaining a general ledger is one of the main components of bookkeeping. The general ledger is a basic document where a bookkeeper records the amounts from sale and expense receipts. This is referred to as posting and the more sales that are completed, the more often the ledger is posted. A ledger can be created with specialized software, a computer spreadsheet, or simply a lined sheet of paper.
The complexity of a bookkeeping system often depends on the the size of the business and the number of transactions that are completed daily, weekly, and monthly. All sales and purchases made by your business need to be recorded in the ledger, and certain items need supporting documents. The IRS lays out which business transactions require supporting documents on their website.

The function of accounting
Accounting is a high-level process that uses financial information compiled by a bookkeeper or business owner, and produces financial models using that information.
The process of accounting is more subjective than bookkeeping, which is largely transactional.
Accounting is comprised of:

• Preparing adjusting entries (recording expenses that have occurred but aren’t yet recorded in the bookkeeping process)
• Preparing company financial statements
• Analyzing costs of operations
• Completing income tax returns
• Aiding the business owner in understanding the impact of financial decisions

The process of accounting provides reports that bring key financial indicators together. The result is a better understanding of actual profitability, and an awareness of cash flow in the business. Accounting turns the information from the ledger into statements that reveal the bigger picture of the business, and the path the company is progressing on. Business owners will often look to accountants for help with strategic tax planning, financial forecasting, and tax filing.

The bookkeeper role vs the accountant role
Bookkeepers and accountants sometimes do the same work. But in general, a bookkeeper’s first task is to record transactions and keep you financially organized, while accountants provide consultation, analysis, and are more qualified to advise on tax matters.
Bookkeeper credentialsTypically, bookkeepers aren’t required to have any formal education. To be successful in their work, bookkeepers need to be sticklers for accuracy, and knowledgeable about key financial topics. Usually, the bookkeeper’s work is overseen by either an accountant or the small business owner whose books they are doing. So a bookkeeper can’t call themselves an “accountant.”
Accountant credentialsTo qualify for the title of an accountant, generally an individual must have a bachelor’s degree in accounting. For those that don’t have a specific degree in accounting, finance degrees are often considered an adequate substitute.
Accountants, unlike bookkeepers, are also eligible to acquire additional professional certifications. For example, accountants with sufficient experience and education can obtain the title of Certified Public Accountant (CPA), one of the most common types of accounting designations. To become a CPA, an accountant must pass the Uniform Certified Public Accountant exam and possess experience as a professional accountant.

Bookkeeping vs accounting summary

Bookkeeping	Accounting
Recording and categorizing financial transactions	Preparing adjusting entries
Posting debits and credits	Preparing financial statements
​Producing and sending invoices	Completing income tax returns
​Maintaining and balancing subsidiaries, general ledgers, and historical accounts	Financial analysis and strategy
Completing payroll	Tax strategy and tax planning
Recordkeeping     ​	Financial forecasting

The Chief Financial Officer 
The most common question when it comes to the CFO is “Can’t I just have my accountant do this?” Seasoned business leaders know that the value each of these roles brings to the table is quite different, especially in how they contribute to boosting the business machine's success.
Whether you run a small or medium-sized business and think you need a CFO or you haven't thought much about it yet, you need to understand the difference between a CFO and an accountant.

Strategy vs. Tactics
While both of these initiatives are essential to build and run a success-oriented company, a CFO focuses on planning and executing a broad, all-encompassing growth initiative using industry knowledge, experience, and tactics. They serve as more of a visionary, pursuing long-term success through expansion, mergers, and capital investments.
Small business accountants tend to focus on smaller, shorter-term tactical actions that improve current results; their training is primarily in finding and correcting inefficiencies that affect the near-term, and they rarely focus on a long-term perspective.
To visualize this, Imagine the accountant is the one showing you where you have been and how you got there, the CFO is the one that uses this information, along with outside information, to charts a strategic plan for your business should go. 

The Bottom Line
Organized financial records and properly balanced finances produced by the bookkeeper, coupled with smart financial strategy and accurate tax filing by the accountant and CFO, contribute directly to the long-term success of every business.
Some business owners learn to manage their finances on their own, while others opt to hire a professional so that they can focus on the parts of their business that they really love. Whichever option you choose, investing—whether it be time or money—into your business financials will only help your business grow.