What is Bookkeeping?

Keeping track of money is essential for any business. Without accurate financial records, even the most promising business idea can crumble under the weight of mismanaged expenses and overlooked income. That’s where bookkeeping comes in.

Bookkeeping is the process of recording and organizing financial transactions and ensuring that every dollar earned or spent is appropriately tracked, according to Eric J. Weitner, a Certified Public Accountant (CPA) with his MBA, and a business adjunct at Southern New Hampshire University (SNHU). He has over a decade of experience teaching accounting at SNHU.

Weitner explained it like this: “Bookkeeping is like a business' version of a personal checkbook," he said. "It involves recording and organizing financial transactions to maintain accurate and up-to-date financial records for a business."

Just as you may keep track of personal expenses and income to manage your budget, businesses rely on bookkeeping to monitor their financial health and plan for the future.

So, Why is Bookkeeping Important? 

Weitner said bookkeeping is critical because it lays the groundwork for making smart business decisions and for long-term success. "Bookkeeping ensures accurate financial records, which help businesses track their income and expenses and make informed business decisions," he said.

According to the Internal Revenue Service (IRS), record and bookkeeping can also help you with:

• Identifying sources of income
• Keeping track of deductible expenses
• Monitoring the progress of a business
• Preparing financial statements

Additionally, the IRS said that bookkeeping is needed for your tax returns. They noted that business records must be available at all times for inspection by the IRS, and that they may ask to have specific items explained. Keeping updated books can speed up their examination and ensure accuracy of tax returns, according to the IRS.

What Exactly Does a Bookkeeper Do? 

A bookkeeper manages a business’s daily transactions and ensures that all money is accurately recorded and categorized, Weitner said. He noted that a bookkeeper's day-to-day responsibilities can include:

• Logging every financial transaction
• Managing invoices and bills
• Organizing transactions into appropriate accounts (e.g., assets, liabilities, revenue and expenses)
• Performing bank reconciliation
• Processing payroll

Their work allows business owners to closely monitor expenses and comply with tax regulations. By maintaining organized records, bookkeepers also provide information for financial analysis and data reporting.

What is the Difference Between Accounting and Bookkeeping?

At first glance, it might seem like bookkeeping and accounting are interchangeable. However, accounting is defined as: "The system of recording and summarizing business and financial transactions and analyzing, verifying and reporting the results," according to the Merriam-Webster Dictionary.

"Bookkeeping is just one part of the broader accounting field,” Weitner said.

Bookkeeping focuses more on the administrative side of a business's financial past and present, according to the Small Business Association (SBA). While on the other hand, accounting utilizes bookkeeper data and is much more subjective. SBA noted that a bookkeeper can provide basic day-to-day functions at a lower cost, but won't possess the formal education of a CPA. 

What Pays More: Accounting or Bookkeeping?

In terms of earning potential, accounting generally offers higher salaries than bookkeeping because it involves more complex financial analysis and strategic planning, according to the U.S. Bureau of Labor Statistics (BLS).*

BLS reported bookkeeping jobs, including accounting and auditing clerks, earned a median salary of $49,210 in 2024, while accountants and auditors earned a median salary of $81,680.*

How to Become a Bookkeeper

"To become a bookkeeper, typically you need a high school diploma or equivalent as the minimum," Weitner said. "Many times, you will see job openings that state a degree is desired but not required."

However, he noted that most bookkeepers have some additional education to enhance their skills, such as a degree or certification.

According to BLS, some employers may prefer that you have taken some college courses in a related subject, such as accounting. At SNHU, an associate degree in accounting can teach you fundamental skills, such as:

• Data-gathering
• Ethical decision-making
• Financial record and statement maintenance
• Stakeholder communication

SNHU's undergraduate accounting certificate is another option if you're looking to build your basic general accounting and taxation skills. This six-course certificate features topics like "Financial Accounting" and "Federal Taxation."

Certification programs, such as those offered by the American Institute of Professional Bookkeepers (AIPB) and the National Association of Certified Public Bookkeepers (NACPB), could be another way to develop your skills and keep up-to-date on industry standards. In evolving fields such as bookkeeping, accounting automation continues to play an important role, according to Weitner.

He said that while some routine tasks are becoming automated in the field, he believes that businesses will still need good bookkeepers. “Accounting is the backbone of every business," he said. "And bookkeeping isn’t going anywhere anytime soon."

If the world of bookkeeping interests you, Weitner noted the breadth of the field: "There are countless paths to pursue," he said.

*Cited job growth projections may not reflect local and/or short-term economic or job conditions and do not guarantee actual job growth. Actual salaries and/or earning potential may be the result of a combination of factors including, but not limited to: years of experience, industry of employment, geographic location, and worker skill.

Nicholas Patterson ’22 is a writer and alumnus of Southern New Hampshire University (SNHU), where he earned his bachelor’s degree in English and creative writing. He is currently honing his craft further as he pursues an MFA in Creative Writing from SNHU. Connect with him on LinkedIn.