Bookkeeping vs. Accounting: What’s the Difference and Which Does Your Business Need?
Many small business owners often confuse bookkeeping and accounting as the same thing. Both deal with your business finances, but really they serve a different function.
Knowing the distinction between the two can assist you in determining what you actually need help with: a bookkeeper, an accountant, or a combination of both.And, by the way, you don't need to be a financial expert to understand the differences. We can explain it to you really simply.
What Is Bookkeeping?
Bookkeeping refers to the act of recording and keeping track of financial transactions for a business.
Apart from this, a bookkeeper also handles:
Sale and income activities
Spending of the business
Banks' operations
Invoice work and billing work
Paying off debts
Closing receivables
Transactions related to payment of wages
Management of financial documents
An example would be when your business earns money from a client or spends money on a business expense, the details of that transaction should be recorded properly.Regularly maintaining the small business's bookkeeping work results in the business records being neat and updated.
We can say, the act of running bookkeeping is laying an appropriate groundwork for the business' finances.
What Is Accounting?
In general, accounting takes the processes performed by a bookkeeper one further.
A bookkeeper's role includes mainly recording financial transactions, whereas a bookkeeper is more focused on the actual keeping of books.
An accountant may help with:
Financial analysis
Tax planning and preparation
Financial statements
Business planning
Budgeting
Cash flow analysis
Tax strategy
Business growth decisions
In simple terms, bookkeeping records the numbers, while accounting helps you understand what those numbers mean.
Bookkeeping vs. Accounting: The Key Difference
Maintaining a record of financial figures is one of the main responsibilities of a bookkeeper.
At the same time, accounting is all about examining, understanding, and using those financial numbers.To get a better idea of accounting against bookkeeping, think of it like stages. It is the bookkeeper's duty to record and arrange all your financial transactions.
And a chartered accountant uses the data for analytical work to show you the state of business and suggest you the best course from a financial standpoint.As an illustration, a bookkeeper will do things like recording and listing all your income and expenses for each month.
A certified public accountant then can come on board to examine those books and help you figure out if your profit margins are up or down or if you have tax and/or cash-flow problem scenarios.
These are very different fields and both play different parts in a business.Yet, one could be better in certain situations according to what exactly is being sought.
Do Small Businesses Need a Bookkeeper?
Many small businesses can Yes get tremendous benefit if they outsource their bookkeeping services to professionals. Once the business grows a lot, it might be pretty soon that the owner has trouble handling all the financial transactions.
At that time, you may get different bank accounts, credit cards, vendors, customers, employees, and even recurring expenses. If you try everything yourself, it could be quite difficult to get everything done and your business is going to suffer from that.
Professional bookkeeping service for small business will maintain an organized record of your financial transactions and help you better understand the financial state of your business. A bookkeeper is someone you can count on to provide you with the documentation you will need if an accountant comes up to you at any time and requests a viewing.
Do You Need Both a Bookkeeper and an Accountant?
Of course, for many rapidly growing businesses, the answer is, "yes." Bookkeeper and accountant work as your financial team's bookkeeping partner and accounting partner respectively.
Your bookkeeper can record and track business transactions throughout the year and provide well-kept and clear accounts. After that, your accountant can make use of those records in preparing your tax returns, in making your financial reports and in strategizing your financial planning. Through such collaboration, you can spend less time and effort managing your finances and still get accurate, neat, and complete records.
Of course, your type of business will determine your needs. For example, a small business with little finances might benefit from just having someone to keep the records while the owner still does most of the running. However, a business that is growing fast or a large business needs to have both a qualified accountant and good bookkeeper to stay on top of the financial picture.
Is QuickBooks an option?
One way many small business owners get their affairs sorted is by using accounting software like QuickBooks to keep track of their money and business records
Much like a pen and paper, your software alone can not be relied upon to keep accurate and complete records for you. Fundamental bookkeeping operations, like assigning transactions to the correct categories, reconciling accounts, and performing financial checks on a regular basis, will still remain manual steps.
A professional bookkeeper experienced in QuickBooks will not only help you in organizing your accounting records but also in turning your accounting system from being useful to being a powerhouse of information. Your accounting tasks that were once boring and time-consuming will also get done faster through your computer with their help.
How Do You Find the Right Bookkeeper?
Finding a reliable bookkeeper can sometimes be challenging, especially if you are searching online and comparing dozens of providers.
You should consider factors such as:
Experience with your industry
Knowledge of your accounting software
Services offered
Communication process
Availability
Pricing
Professional qualifications
Understanding of your business needs
You want someone who does more than simply enter numbers. The right bookkeeping professional should understand your business requirements and help keep your financial records accurate and organized.
Find a Bookkeeper Through My CPA On Call
If you are looking for professional bookkeeping support, My CPA On Call's Bookkeepers Marketplace can simplify the search.
The Marketplace helps businesses connect with CPA-vetted bookkeepers based on their industry, software, and specific bookkeeping needs. Instead of spending hours searching for providers on your own, you can use a more focused approach to finding bookkeeping support that fits your business.
Bookkeeping or Accounting: Start With What Your Business Needs
Bookkeeping and accounting are different, but they work together.
Bookkeeping keeps your financial records organized. Accounting helps you understand and use that financial information.If your books are falling behind, your financial records are difficult to understand, or you are spending too much time handling transactions yourself, it may be time to consider professional bookkeeping services.
And as your business grows, having reliable financial professionals by your side can make managing your finances much easier.
Visit the My CPA On Call Bookkeepers Marketplace today and explore your options.
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