Staffing the accounting department of a small nonprofit organization can be confusing. Should you hire an accountant or a bookkeeper and what is the difference? Accountants cost more. Will hiring a bookkeeper save money?
Accountants measure and record economic activity and communicate that activity to decision makers. They have a broad understanding of economic activity, knowledge of the rules that govern measuring, recording, and communicating economic activity, and the experience necessary to make these work together effectively. An accountant gains this capacity through undergraduate study, continuing education in generally accepted accounting principles, and on the job experience with financial systems and users of financial information.
Bookkeepers are generally good at entering data in the accounting system. They may have a basic understanding of economic activities, but they don’t have the detailed understanding of accounting principles learned in an undergraduate accounting program. They are unlikely to stay current and advance their understanding of accounting rules and regulations through continuing education. Their work experience will not include recording complex transactions or preparing standard nonprofit financial reports. Without this capacity they are not capable managing an effective accounting system or communicating the financial information that decision makers need to make informed decisions.
It may seem like you are saving money by hiring a bookkeeper, but this decision usually leads to confusion, frustration, costly cleanups, and a lack of confidence in financial management that can take up valuable staff and Board time and may lead to lost donor confidence.
