Bookkeeping is where it all starts: It’s the first step in taking care of your business’s financial health. It involves recording and collecting your business’s daily financial transactions, including bank transactions and receipts for sales or purchases. Bookkeeping refers to the technical process of organizing and preparing your profits and expenses for further analysis.
Once that’s done, the financial data you get is subjected to the accounting process. Accounting formulates the big picture of your business by dissecting and interpreting financial information. Accurate accounting is crucial for business owners, as it provides insight into their business’s financial condition.
Basically, you shouldn’t pit bookkeeping vs. accounting. Bookkeeping is more about record keeping and classification, while accounting requires more knowledge to “read” the financial information. Both are essential for a successful venture. Many people do some sort of bookkeeping, i.e., they record receipts and categorize their expenses every month to make budgeting decisions. However, business bookkeeping is more stressful, as reconstructing your business’s financial history is no small feat.
You can turn to Count On Me for both bookkeeping and accounting services.
An accountant prepares and analyses financial statements, gives financial or tax advice
Preparing financial statements. They are the key financial documents of your company. Financial statements usually include:
- The balance sheet or the statement of the financial position. It shows how much your company has and owes and what is its current position.
- The income statementor the profit and loss account. It shows how much your company has earned and how much it has spent in a specific period.
- The cash-flow statement. It shows how much cash has moved through your business inside a certain period and how much it has right now.
Bookkeeping Versus Accounting – An Overview
If bookkeeping and accounting looked like the same job to you, now you know that these are two different roles with different responsibilities and education. They are both parts of the same process – taking care of a business’s financial health – but a bookkeeper and an accountant have different responsibilities. By now, you probably have a clear vision of what services you need for your business, but just in case, we’ll outline the critical tasks professionals from both branches perform. That way, you’ll always know what the difference between accounting and bookkeeping is:
Bookkeepers
- Perform day-to-day financial tasks
- Record bank transactions, purchases, sales, receipts
- Take care of all your income
- Manage your general ledger
- Organize and categorize business expenses
- Manage the payroll
- Use bookkeeping and accounting software to produce weekly or monthly statements for business owners
- Work closely with accountants and send them statements quarterly for the purpose of tax payments
Accountants
- Analyze and interpret financial data
- Advise bookkeepers on how to manage transactions and prepare the payroll
- Prepare financial statements for business owners (balance sheets, income statements, and cash flow statement)
- Review the general ledger and other documents
- Prepare taxes, calculate deductions, and work with the IRS
- Advise managers and business owners
Future Strategy
Having accurate records and an up-to-date awareness of how your business flows on a short-term basis is a key component for deciding where to go next, and that’s where a bookkeeper comes in. While a bookkeeper will remain an important partner for strengthening that foundation of a company, when it comes to creating pathways for the future, you should look to an accountant.
A skilled accountant is the person who helps you scale and plan for the next steps in your business. They analyze your books, help you understand what’s working and what needs to change, and they offer the expertise needed to help you move into the next phase of your business.
With the help of an accountant, you may be able to identify and navigate tasks including strategic tax planning, acquiring assets, calculating growth, and analyzing investment opportunities.
The Bottom Line
While it is important for every type of business owner to understand the financial side of their business, bookkeepers and accountants can make that process far less labor intensive for the business owner. When it comes to deciding between one or the other, think of them as a pair working in tandem.
As a small business owner, employing an experienced bookkeeper who can set up your books and maintain them accurately will free up invaluable time. Likewise, leaning on a skilled accountant can help you understand your business beyond the day-to-day and set you up to make smart choices about the future. Investing in both a bookkeeper and an accountant on your team ultimately sets up your business for the most success while keeping you free to focus on what you’re truly passionate about.
