Discovering some old books that you should have returned to the school library 15 years ago does not make you a good bookkeeper! Good at keeping books perhaps, but a bookkeeper in the financial sense is something else entirely, – something of which gets mixed up with accounting all of the time. Most people believe that bookkeeping and accounting are one in the same, however, there are some key differences that you should be aware of, particularly as a new business owner.
We’ll begin by breaking down bookkeeping vs accounting in their simplest form for you. Following that, we’re going to explore their features and differences, for your convenience.
What is Bookkeeping?
Simply put: booking keeping is the process of recording all financial transactions related to a business.
What is Accounting?
Accounting is then responsible for taking this financial data, interpreting, classifying, analysing, reporting and finally, summarising this data.
So, while both disciplines are similar, their functions are designated for different outcomes. A skillful bookkeeper’s objective will be to record all of the relevant data accurately and efficiently, laying a strong foundation upon which a skilled accountant can build. A qualified accountant will then be able to gauge the current financial situation of the business and communicate the relevant information to the appropriate authorities – that is the objective.
Bookkeeping records the financial data, that is all. That’s not to take away from a bookkeeper and suggest that hard work and skill is not required, – however, when it comes to decision making, an accountant is required to analyse and process the data. Management will then be able to make critical business decisions based on the accountant’s findings. So, in this light, it is evident that both bookkeeper and accountant are crucial components in a businesses financial functionality.
The Importance of Synchronicity Between Bookkeeping vs Accounting
Many business owners like to handle their own bookkeeping, which is understandable, given that your business is essentially ‘your baby’. You’ve put much hard work into growing it into what it is today, and the thought of inviting an outsider to come and handle your sensitive information can be unsettling.
That being said; if you want to be able to make sound financial decisions based on the data recorded, then you must ensure that you are very efficient when it comes to keeping the books. Synchronicity between bookkeeper and accountant is vital, particularly if you want to get the best possible results.
This is why it is always advised that you hire a bookkeeper and an accountant. You can handle the books yourself, though it requires time and dedication to do so thoroughly and effectively. By outsourcing these tasks to one dedicated firm, they can work closely together without delay. This alleviates the pressure from you, allowing you to focus on other important tasks that deserve your attention.
Simply put, an accountant and bookkeeper working closely together will produce much better results, faster and with excellent efficiency.
The Other Benefits for Passing Your Bookkeeping and Accounting Responsibilities onto the Professionals
Of course, outsourcing your bookkeeping and accounting can help you and your business in many different ways. We’ve been through one in the previous section: efficiency. Now, let’s take a quick look at a few other key benefits.
1 – Time Management
Time is without a doubt, your most precious and valuable commodity as a business owner. You’ve got a million and one tasks to carry out on a daily basis and anything that you can do to lighten that load is a bonus. By outsourcing these tasks, you’ll be able to dedicate your precious time to other, profit generating tasks. Then on the flipside, your bookkeeper and accountant will be able to accurately record your financial information and find ways to help streamline your business and its earning potential.
2 – Cost Effective
Time is money, but money is money too, and a qualified bookkeeper and accountant will be crucial in helping you handle yours. Any reputable and reliable accountant will be able to analyse the books and find new and innovative ways for you to save money, cut back in areas and ultimately reduce your overall tax bill at the end of the year.
Many people worry about outsourcing their books and accounting out of fear of spending too much money, yet it should be treated as an investment, rather than expenditure. If your accountant isn’t saving you money, you’ll soon find out and can respond accordingly.
3 – Access to Technology
Any decent accounting firm will have access to the latest in technology. This means that they will be using the very best accounting software which comes with a wealth of benefits at your disposal. If on the accounting, you decided to keep the books yourself and handle all tax-related accounting, you’d be at a disadvantage, having to spend an awful lot more time and effort on doing so.
In conclusion, we can clearly see that while a bookkeeper and an accountant have similar roles to the untrained eye, there are key and evident distinctions. A bookkeeper makes accurate records of all financial transitions carried out by a business. – When done properly, this lays a strong foundation upon which a trained accountant can build. An accountant will then analyse all of the recorded data and compile reports for management to review. These reports are often accompanied with tips and suggestions on critical decisions that can affect the overall earnings and tax-related savings at the end of the financial year.
Again, when working closely together, a bookkeeper and an accountant can produce some highly beneficial results. If you really want to get the best out of your business, streamline your processes and take your company to greater heights; outsourcing such financial tasks is certainly something worth considering.