40% of small business owners say accounting and bookkeeping is the worst part of owning a business. I’d argue that this is because it’s so time-consuming and complex. That’s why so many business owners will seek the expertise of a professional accountant or bookkeeper.
“But aren’t those the same thing?” No. While people often interchange the words, seeing them as synonymous with “tax professional”, bookkeeping and accounting are different.
In this blog post, we’ll explain the difference between bookkeeping and accounting and how, when used together, they can set your business up for success!
What is Bookkeeping?
Bookkeeping is the process of recording all financial transactions made by a business. So, it’s the job of a Bookkeeper to record, classify, and organize every financial transaction that is made through the course of business operations.
Complete data entry and collect transaction details for incoming and outgoing bank accounts.
Use bookkeeping software, spreadsheets, and other databases to post up-to-date financial transactions.
Track debits (incoming dollars) and credits (outgoing dollars) for each account.
Generate financial reports, such as balance sheets and income statements.
Maintain and monitor financial records for accuracy.
Reconcile or report any discrepancies in financial reports.
Produce or pay invoices for credit card bills or inventory orders.
File tax returns.
These tasks are all doable on your own, through the use of a software programs like QuickBooks, but here are some reasons to hire a professional bookkeeper:
Bookkeepers free up time, so you can focus on things like building your vision, fine-tuning workflows, and increasing your bottom line.
Hiring a professional bookkeeper minimizes the room for error.
Some bookkeepers offer tax preparation, helping to break down complex small business tax codes.
If the IRS or another entity ever audits your business, having solid bookkeeping records can keep you out of trouble.
What is Accounting?
Accounting involves the compiling, analyzing, verifying, and preparation of financial records for a business. In short, Accountants work with financial documents to ensure lawful, efficient, and compliant business practices.
Additionally, accountants must explain their findings in written reports to their organization’s managers or clients. Accountants will then use their findings to suggest various ways to reduce costs and improve profits. Think of accountants as the financial backbone of your company, preparing financial statements and ensuring you receive maximum tax benefits.
Determining payroll requirements, maintaining payroll data, and preparing and processing monthly payrolls
Supervising the input and handling of financial data and reports for the company’s automated financial systems
Interacting with internal/external auditors in completing audits
Preparing and reviewing budgets, revenue, expenses, payroll entries, invoices, and other accounting documents
Analyzing and reviewing budgets and expenditures for local, state, federal, and private funding, reviewing contracts and grants
Preparing profit and loss statements and monthly closing and cost accounting reports
Analyzing revenue and expenditure trends and recommending appropriate budget levels, and ensuring expenditure control
Compiling and analyzing financial information to prepare entries to accounts, such as general ledger accounts, and documenting business transactions
Explaining billing invoices and accounting policies to staff, vendors, and clients
Resolving accounting discrepancies
As you can see, accounting is no small task. It’s a vital part of running your business. As such, it’s not wise to attempt it yourself unless you’re a CPA or licensed to practice accounting. And even then, it’s best to hire someone else.
Does My Small Business Need Bookkeeping and Accounting?
Yes. Having one without the other is not an option. Remember, a bookkeeper focuses on keeping detailed financial records of your business’ transactions. An Accountant analyzes it to provide insight and guidance on tax filing and big financial decisions. Bookkeeping and accounting are different sides of the same coin and vital to your business’ operations.
How do I Get Started?
For your business to achieve the growth you want, you have to learn to delegate certain tasks so, you can focus on that growth. What’s more, having an accountant and bookkeeper on staff will actually help foster that growth by improving your financial wellness.
With Nevada Corporate Headquarters, business finances and taxes don’t have to be a pain. Comprised of certified public accountants and consultants, our tax professionals specialize in preparing tax returns for corporations and LLCs.
We will help you organize and deliver your business income and expenses into accurate reports, so you’ll always know where you stand. Additionally, we’ll also help minimize your federal and state income tax exposure, so you keep more of your hard-earned money.