One thing your business is expected to do is to make money. To do that effectively, you may need both bookkeeping and accounting services. Bookkeeping and accounting are the finance practices that make it possible:
– to know how much money you make,
– where and how you spend it, and
– what you need to do to make your company successful financially.
They sound very similar, but in fact there are slight differences between the two practices. Let’s understand the difference between Bookkeeping and Accounting.
What Is Bookkeeping?
Bookkeeping describes the task of documenting every financial transaction your company makes throughout the business day. Highly detail-oriented people — those who are likely to notice something seemingly minor like a misplaced expense receipt or invoice — typically become bookkeepers and work closely with the company owner.
Bookkeeping tasks include:
- Documenting a company’s daily sales transactions
- Reviewing all bills received, known as accounts payable
- Ensuring company bills are paid on time
- Tracking customer invoices, known as accounts receivable, and payments
In a smaller company, a bookkeeper might also take care of payroll. This helps in ensuring employee time sheets and contractor invoices are reviewed for accuracy and paid. In the past, bookkeepers recorded all transactions by hand in books called ledgers and later used spreadsheets. Today, online software such as QuickBooks automates many tasks. So the job of a bookkeeper can be done quickly with high degree of accuracy.
Why Accounting Is Important in Business
There’s accounting and then there are accountants. Accounting is concerned with what the data collected in those meticulous bookkeeping records says about your company’s financial health. A business owner most certainly can review their own accounting reports — the balance sheet and income and cash flow statements. But some hire qualified accountants to help them understand what the financial data means.
So either you or an accountant can review your accounting reports. This helps you to understand details like which products or services sell the best and where your company might be losing money. If you’re turning a profit, you might be wondering how much money to put back into your company and in outside investments. And that’s something an accountant is qualified to advise you about as well.
Financial Software Innovations
Software has eliminated much of the tedious work required to maintain accurate bookkeeping and accounting records. For example, bookkeepers sometimes worked late into the night. They go through stacks of paper receipts manually and carefully document every sale. Today, some business owners use computerized cash registers. This helps to transfer sales transactions into their accounting software of choice with a few clicks. Creating, sending, and tracking invoices and paying bills is also easily accomplished with online accounting software. Given these technological advances, do company owners still need to hire accountants and bookkeepers?
Bookkeeper and Accountant Hiring Tactics
When you first launch a company, software might make bookkeeping and accounting so easy. You don’t need to hire any extra help. As your company grows, you might hire part-time or full-time bookkeeping and accounting employees. Some company owners also hire freelance bookkeepers and accountants on an as-needed basis. A virtual assistant can also take care of basic bookkeeping for you.
Whichever hiring tactic you use, accounting software like QuickBooks makes it easy to share access to people who work for you in bookkeeping and accounting position. This flexibility helps you keep your finger on the pulse of your company’s finances whether you and your staff are sitting in the same office or on opposite sides of the world.