Case of the Missing Bookkeeper

…a cautionary tale for would-be bookkeepers and their employers…

As small businesses and CPA firms try to meet tax and regulatory requirements, we all understand the need to provide quality accounting and tax compliance services for small business. Too often this has meant trying to “professionalize” bookkeeping, as though it was a necessary precursor to accounting.

This approach brings with it a couple of questions:


  1. Where does bookkeeping end and accounting begin?
  2. Who should perform these functions and what training do they need?

Certainly all of us would like to avail ourselves of well-trained and experienced bookkeepers that eliminate the need for entry-level accountants and accounting technicians – and cost less to hire.

Eric Matthews’ understanding of the bookkeeping function is quite common in our experience. However we’d suggest that changes in technology have made the distinction between bookkeeping and accounting almost irrelevant. Bookkeepers today use accounting software to perform accounting functions.

Bookkeeping as we used to define it, doesn’t really exist. Today bookkeeping is really the accounting function performed by someone without any accounting certification and often little or no training. With the advent of online accounting software, with electronic and digital records, and particularly with online banking, it is actually good recordkeeping that has become the critical precursor to accounting.

In our Records Management Workshop we’ll show how our smallest businesses can substitute good recordkeeping for what we used to call “bookkeeping”, without sacrificing anything in terms of the quality of information. What’s more professional accountants – if properly aligned with these new realities – can actually achieve greater efficiencies – and hence be more profitable, while reducing costs to their clients.

Hiring a bookkeeper is what small businesses often do when they need accounting done and they don’t want to pay for an accountant. Of course the “education industry” is pleased to provide courses that purport to train prospective bookkeepers for a career in accounting and tax preparation.

The graphic below is an advertisement clipped from a website, by a private college that offers training in bookkeeping. According to them bookkeepers…

  • Perform full cycle accounting for small and medium-sized businesses
  • Prepare simple income tax returns


Most CPA firms wouldn’t allow a university graduate with a business degree to perform full cycle accounting for small and medium-sized businesses, at least not without a significant amount of supervision by a CPA.

What’s more, if they did they could be subject to professional discipline.

When it comes to taxation, it needs to be said that the entire Income Tax Act is in play when someone files a tax return.

A simple tax return could be simple merely because the practitioner doesn’t know what questions to ask.


I began training as an accountant just as the IBM PC was introduced in 1981. For about 3 years I worked as an accounting technician for 3 small firms in central Vancouver Island. The modus operandi was the same in each of these small fiirms. In terms of tehnology we used electronic calculators with a paper tape and columnar journals.

Somehow, without computer technology we managed to efficiently “write up” a year’s worth of transactions and produce financial statements. The statements were drafted on paper and then reviewed by the partner. Once approved by the partner they were sent to the typing pool and proofed for distribution to the client.

As an accounting technician I either did the “write up” (aka “bookkeeping”) myself, or reviewed it and “posted” to a paper ‘working trial balance’ on pads of columnar paper, designed for that purpose.

In the early 1980s the workflow looked like the diagram shown above.

We almost invariably wrote up the transactions on a “cash basis” and then adjusted to the “accrual basis” which was required both for the financials and the tax return.

The reason we took this approach was to “keep it simple” for the bookkeepers, who often doubled as “receptionists” and had little or no accounting training.

There was an advantage to this approach for the CPA reviewing the file. By having a detailed view of cash transactions, there was a great deal more visibility into what was actually happening in the business.

The introduction of the personal computer and affordable accounting software, meant that bookkeepers needed to make the transition from simple “cash basis” write up to full accrual accounting. As a result the CPA or accounting technician reviewing the file, needed to discover the idiosyncracies of the bookkeeper who did the work.

Strangely it can actually be more difficult to discover errors buried in reports generated by accounting software, since it all appears correct on the surface. Entry-level accounting software enforces ‘double entry accounting’ whether the bookkeeper understands what that means or not.

Certainly many bookkeepers made the transition to using accounting software and did an excellent job. Others tried to use it as a cash basis system, like the paper systems they were used to.

We would argue that most very small businesses should focus their energy on implementing a simple and effective recordkeeping system as a better pre-cursor to accounting functions.

Of course that means that CPA firms must re-shape the “bookkeeping workflow” to take advantage of technological changes in the intervening years:

  1. Online banking
  2. Cloud-based file storage and sharing
  3. Powerful computer-based spreadsheets
  4. Online accounting software

By re-designing the workflow, as CPAs we accomplish 2 things:


  1. We virtually eliminate the need for “bookkeepers”
  2. We gain better visibility into the underlying cash transactions of a given business


The statistics shown above were compiled by WORKBC. They show that bookkeepers actually earn less per hour than either professional accountants (blue bars above) or administrative assistants (grey bars above).

Note that the definition of “Financial Auditors and Accountants” is not restricted to CPAs, but includes university graduates and others without any professional certification. It’s no surprise that bookkeepers earn less than accountants. However consider the fact that a bookkeeper earns less than an “administrative assistant” who has no particular training. That says to us that the market discounts the value of bookkeeping.

As a career choice it would seem pretty much a dead end.

Instead would-be bookkeepers should consider coupling simple training in what we call “records management” – with other, more highly valued skills.





Published by Rob Farrow

accountant, entrepreneur, former chef, occasional artist, angel investor, business advisor, corporate tax specialist

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