Bookkeeping vs. accounting vs. controller vs. finance

Bookkeeping, accounting, and finance management are all critical to the financial success of your business. However, there are some key differences in these activities. 

Bookkeepers, accountants, controllers, and CFOs all have different roles. While sometimes the tasks associated with the roles can be outsourced, there will come a time when you need to have someone in-house performing the jobs. 

In this article, we will explore the following comparisons: bookkeeping vs. accounting, accounting vs. controller, controller vs. finance, finance vs. bookkeeping. 

Bookkeeping and Bookkeeper

If you imagine the financial management of your company as a pyramid, then the bookkeeping is at the bottom. Accurate and meticulous journals provide the solid foundation of a company’s financial health.

What is bookkeeping?

Bookkeeping is simply the recording of financial transactions. It is the day-to-day counterpart of the big idea work done under accounting. 

Bookkeeping includes the creation of source documents, such as bills, invoices, and journal entries, so that there is a record of all financial transactions.

What is a bookkeeper?

A bookkeeper’s primary job is data entry. They are also responsible for maintaining all of the company's financial records. 

Bookkeepers are also generally responsible for invoicing customers, ensuring bills are paid, ensuring no errors on any documents, and tracking revenue and expenses in general.

While the job can appear to involve following simple instructions, a bookkeeper should have a general appreciation of the duties of finance managers and accountants so that they can keep all data in a usable format.

Accounting and Accountant

Built on the foundation of financial health provided by bookkeeping, accountancy takes the information provided by bookkeepers and puts it in an understandable format. This produces actionable documents that are easily understood by businesspeople and the wider public alike.

What is accounting?

Accounting is the measuring, processing, and presenting of financial information about businesses, government bodies, or other economic entities. 

Accounting comes in two forms: accrual accounting and cash accounting. 

Accounting has four many tasks:

• Budgeting

• Cost allocation analysis

• Preparation of financial statements

• Forecasting

While budgeting and the preparation of financial statements are tasks that overlap with bookkeeping, cost allocation analysis and forecasting are tasks often shared with finance management.

What is an accountant?

Accountants perform tasks related to cost allocation following accounting principles and legislation. They are also in charge of drafting and managing budgets based on input from the finance managers.

Accountants are involved in financial forecasting by visualizing revenue and expense data. 

However, the most important and typical task of accountants is preparing financial statements. Every year, all public companies must present financial documents detailing their current state and progress over the accounting period.

These documents include the balance sheet, income statement, and statement of cash flows.

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Controller, CFO, and finance

The controller takes the information provided by accountants, double-checks it for accuracy, and then reports on the financial health. 

At the pinnacle of this pyramid, the CFO should understand all of the company's financial statements and the wider market environment and be able to use that information for forecasting and decision-making.

What is a controller?

The controller is the manager of the accounting department. Controllers manage all of the accounting functions, from budget creation and adherence to the timely and accurate drafting of financial statements.

This management includes preparing internal reports about whether budgets were followed and confirming that the financial statements are correct.

Controllers also hand off these important documents to the appropriate stakeholders.

In a small business, the controller might be the in-house accountant who coordinates with out-sourced bookkeepers and accountants who do the day-to-day and end-of-period accounting work, respectively. 

What is a CFO?

The chief financial officer (CFO) is the person in charge of finance management. In smaller companies, they might be the sole person in charge of finance management, while in larger companies, they oversee, directly or indirectly, the bookkeepers, accountants, controllers, financial analysts, and finance managers. 

The CFO is ultimately responsible for the accuracy of financial documents and should be prepared to draft letters explaining the documents to stakeholders (investors, the public, etc.) as well as make forward-looking guidance about how the company’s financial health is likely to change in the next quarter, year, and decade. 

A CFO should be able to apply many different strategic tools, such as cost–benefit analysis or SWOT (strengths, weaknesses, opportunities, threats) analysis, to understand the company's overall position within the market and how it might change in the future.

What is finance?

Finance is the catch-all term for the study and management of money and investments. It deals with how governments, companies, and individuals create and acquire money and spend or invest it. 

In companies, finance management is the collective action of bookkeepers, accountants, controllers, and the CFO to perform everything from basic invoicing to forecasting into the future.

This work is usually done with a suite of specialized software. 

Comparisons: Bookkeeping vs. accounting vs. controller vs. finance

All of these terms are confusing. They sound similar because they are, and the differences can be fuzzy at best. 

It isn’t uncommon for these roles to overlap in even midsize companies, especially now with so many useful software platforms making jobs easier and more automated.

Let’s look at some comparisons to see the difference between the terms.

Finance vs. accounting

While accounting focuses on the short-term operations of the company, finance takes a longer and broader view. 

Finance includes the management of assets and liabilities as well as the planning and forecasting of future growth.

Accounting is more concerned with drafting budgets based on the input of finance management and ensuring they are followed. 

Accountants report on the financial condition of the company as opposed to managing it.

Bookkeeping vs. Accounting

Bookkeeping can be considered a more administrative and transactional role. It simply records unprocessed information regarding the money coming in and going out as well as revenue and expenses.

Accounting takes this information and then collates and visualizes it. While the bookkeeper should be careful to make sure all data is entered correctly, the accountant confirms this by balancing the books and drafting the financial statements.

Controllers vs. finance managers

These two roles are very similar. Both finance managers and controllers are responsible for the financial health of the company. 

However, finance managers are more interested in the financial health of the company and work under the CFO, while controllers are more focused on the management of accounting functions including the reporting of financial documents and supervise accountants and bookkeepers.

When to hire someone in a finance role 

As your company grows, it can be hard to know exactly when you need to bring on a new team member, and exactly which roles, in which order, should be fulfilled. 

With the rise of big data and its sources, such as payment processors and CRMs, it is often possible to automate much of the day-to-day accounting and bookkeeping functions. 

While this doesn’t mean your company can or should resist hiring a bookkeeper or accountant, it does mean that they might not be the first person you should look for. 

Especially if you are trying to bootstrap a company, keeping another salary off the payroll can help you keep your burn rate low. 

Conversely, searching for outside investment might hasten the need for a reputable CFO or experienced controller, as investors might need the assurance that such a person brings to the table.

Summary 

Bookkeeping, accounting, and finance management are all necessary tasks for growing businesses. However, the work of bookkeepers, accountants, and controllers can all be aided with the right tools. 

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