INSIGHT

Outsourced accounting vs bookkeeping: What’s the difference? 

Mark Leverette • February 25, 2025

Services: Outsourced Accounting

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Accounting sets the strategic tone for your business activities. When done right, it improves your data integrity, supports strategic automation, and helps you use key insights to make smart decisions that move your business forward.  

But oftentimes, when businesses think about their accounting function (whether in-house or outsourced), they only conjure images of reports, spreadsheets and record-keeping—hallmarks of bookkeeping. While foundational, bookkeeping merely scratches the surface of the full power of a top-tier accounting team.  

A common misconception in the business world is that accounting and bookkeeping are interchangeable terms. However, this is not the case. While both are essential components of financial management, accounting and bookkeeping have distinct roles and responsibilities within an organization’s financial framework. 

Understanding these differences is key to working with the right in-house or outsourced accounting provider, implementing effective financial management strategies and ensuring your company’s overall financial health. 

What is bookkeeping in accounting? 

Bookkeeping is a core component of a business’s financial health, involving systematically recording and organizing a company’s financial transactions.  

It serves as the foundation for the broader accounting function, providing the raw data necessary for financial analysis and decision-making. 

Bookkeeping involves the day-to-day task of recording financial transactions in a consistent and accurate manner, including: 

• Recording sales and purchases 
• Tracking accounts receivable and payable 
• Maintaining and balancing general ledgers 
• Posting debits and credits 
• Reconciling bank statements 

If you’re outsourcing your bookkeeping, your service provider would likely take on several critical tasks to ensure a business’s financial records are well-maintained, such as documenting all financial transactions, processing payroll, managing accounts payable and receivable, as well as preparing basic financial statements like balance sheets and income statements.  

While essential, bookkeeping is just the first step in a comprehensive accounting approach. It lays the groundwork for more advanced financial management and analysis 

What is accounting (and how is it different from bookkeeping)? 

Accounting goes far beyond simple record-keeping. It’s a complex discipline that plays a crucial role in shaping business strategy and driving growth. Where bookkeeping is tactical, accounting is strategic—a multidisciplinary service function that improves your financial and operational stature.  

Think about accounting as the next step to bookkeeping – bringing shape, meaning, strategy, and power to the numbers.  

Accountants perform several key functions that are essential for business success: 

1. Financial reporting: Preparing accurate and timely financial statements that clearly show a company’s financial health. 

2. Compliance: Ensuring adherence to regulatory requirements and accounting standards. 

3. Analysis: Interpreting financial data to provide insights into business performance and trends. 

4. Budgeting and forecasting: Developing financial projections to guide future business decisions. 

5. Risk management: Identifying and mitigating financial risks that could impact the business. 

6. Consultative expertise: From evaluating financial processes and procedures to auditing your technology stack, accountants increase your strategic cache.   

Importance of strong accounting for businesses  

Accounting plays a pivotal role in strategic decision-making by providing valuable insights that guide businesses toward success.  

Through performance evaluation, companies can use accounting data to assess their current standing and pinpoint areas ripe for enhancement. This information proves invaluable when it comes to resource allocation, as financial analysis illuminates the most promising avenues for investment, ensuring resources are directed where they’ll yield the greatest returns. 

Moreover, accounting insights are instrumental in growth planning. They support critical decisions about expansion opportunities, new product development initiatives, and potential market entries.  

When it comes to risk assessment, financial data serves as a compass, helping businesses navigate the potential risks and rewards associated with various strategies. 

Perhaps most importantly, accounting fosters effective stakeholder communication. Accurate and transparent financial reporting builds a foundation of trust with investors, creditors, and other key stakeholders, reinforcing the company’s credibility and supporting long-term relationships. 

Accounting vs. bookkeeping: 5 Key differences 

While bookkeeping and accounting are both essential components of financial management, they serve distinct purposes within an organization. 

1. Scope of work 

For bookkeeping 

Bookkeeping primarily involves the systematic recording and organization of daily financial transactions, including: 

• Documenting sales, purchases, receipts, and payments 
• Maintaining general ledgers and journals 
• Reconciling bank statements 

For accounting 

Accounting, in contrast, encompasses a broader range of activities that build upon the foundation laid by bookkeeping. Accountants: 

• Interpret and analyze financial data 
• Prepare comprehensive financial statements 
• Ensure compliance with tax regulations and accounting standards 
• Provide financial forecasting and budgeting 
• Offer strategic financial advice to management 
• Conduct audits and financial risk assessments 

2. Level of analysis 

For bookkeeping 

Bookkeepers focus on the accurate and timely recording of financial data. Their work is largely transactional and requires attention to detail. They ensure that all financial records are up-to-date and properly categorized. 

For accounting 

Accountants, however, delve deeper into the financial data. They: 

• Analyze financial trends and patterns 
• Identify areas for cost savings or revenue growth 
• Provide insights on financial performance relative to industry benchmarks 
• Use financial modeling to project future scenarios 

3. Financial reporting 

For bookkeeping 

Bookkeepers prepare initial financial reports, such as: 

• Trial balances 
• Profit and loss statements 
• Accounts payable and receivable aging reports 

For accounting 

Accountants take these reports and create more comprehensive financial statements, including: 

• Balance sheets 
• Income statements 
• Cash flow statements 
• Statements of changes in equity 

These advanced reports provide a holistic view of a company’s financial position, performance, and cash flows, which is essential for both internal management and external stakeholders. 

4. Decision-making involvement 

For bookkeeping  

While bookkeepers provide crucial financial data, they typically don’t participate directly in business decision-making processes. Their role is to ensure the accuracy and completeness of financial records. 

For accounting 

Accountants, on the other hand, are often integral to the decision-making process. After conducting a thorough analysis, accountants will recommend strategies to improve financial and operational performance. This could include process changes, tech stack enhancements, tax implications of business decisions, and more.  

4. Qualifications and education requirements 

For bookkeeping 

Bookkeeping positions generally require certifications in bookkeeping (like a certified bookkeeper or a certified public bookkeeper), an associate degree in accounting, or a combination of the two. Ultimately, bookkeepers must have proficiency in bookkeeping software, suburb attention to detail and basic math skills.  

For accounting 

Accounting roles typically demand a degree in accounting, finance, or a related field, as well as professional certifications such as certified public accountant (CPA), chartered accountant (CA), or certified management accountant (CMA).  

Accountants must also complete professional development to stay current with changing regulations and best practices. On the job, they must procure advanced knowledge of accounting principles and tax laws and demonstrate developed analytical and problem-solving skills.  

How to choose between bookkeeping and accounting services 

When deciding between bookkeeping and accounting services for your business, it’s crucial to assess your current needs and future goals.  

Consider factors like business complexity, growth stage, internal financial acumen, and your unique industry.  

For example, companies with complex financial and operational needs or rapidly growing businesses (like companies preparing for an IPO) typically benefit from the strategic insights that accounting services provide versus a standard bookkeeper.  

Your business could be a good fit for outsourced accounting services if: 

• You’re consistently failing to meet financial reporting deadlines or bank requirements 
• You’re transitioning to GAAP standards  
• You lost key financial staff or identified critical financial talent gaps in your organization 
• You need to up-level your accounting software and need access to cutting-edge industry technology  
• You’re struggling to keep up with changing financial regulations 

By carefully evaluating these factors, you can make an informed decision about whether bookkeeping services suffice or if your business would benefit from more comprehensive outsourced accounting support.  

Remember, as your business evolves, so too should your approach to financial management. 

Find the right outsourced accounting provider with BPM  

Bookkeeping and accounting are both essential components of a robust financial management system, each playing a distinct role in supporting business success. 

Bookkeeping forms the foundation, focusing on the accurate recording and organization of daily financial transactions. Accounting takes this financial data and transforms it into actionable insights.  

This is where BPM’s outsourced accounting services can make a significant difference. BPM offers more than just bookkeeping—we provide a comprehensive suite of financial services tailored to your unique business needs. 

To learn more about how BPM’s outsourced accounting services can help your business thrive, contact our team. Let us show you how we can become more than just a vendor; we can be a trusted partner in your business’s financial success.