Bookkeeping vs Accounting: When you run a business, you can’t handle all the jobs and responsibilities. You need different people having expertise in their department to lower the burden and responsibilities. In an article, we have discussed how an accounting professional helps grow your business.
Bookkeeping and accounting help you look after and manage the financial section of your business. Hiring them can be a real lifesaver. But whom to choose when. Many of the experienced business owners are not sure about their differences.
While bookkeeper & accountant they both have the same financial goal and their responsibilities may overlap sometime. Yet there are key differences between them. The small business owner should be aware of these in order to get best out of them.
We have prepared this handy guide for you to make you understand the functional differences between accounting and bookkeeping. After reading this guide, you will be able to decide which one to choose.
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The Business Financial Process
The accounting procedure includes recording, deciphering, ordering dissecting, announcing and outlining budgetary information. Accounting is the way toward chronicle a monetary exchange. Recording money related exchanges are the initial segment of and the establishment of the bookkeeping procedure.
Clerks handle the chronicle some portion of the accounting procedure. Accountants handle all pieces of the accounting procedure
bookkeepers record financial exchanges in sequential request consistently. Because accounting software robotizes a considerable lot of the procedures, a few bookkeepers in little associations likewise order and abridge monetary information in money related reports. These bookkeepers are regularly alluded to as full-charge accountants. They make higher compensations than bookkeepers yet lower pay rates than accountants.
Bookkeeping and their responsibilities
A bookkeeper is a person who keeps a record of daily transactions and financial operation on day to day basis. Their job’s and responsibilities play a vital role in any business.
Their actual goal and responsibilities may vary by the size and types of business, But their basic functions comprise of:
- recording daily financial operation & transactions
- documenting business expenses, profit
- processing payments and transactions
- completing the payroll
- Maintaining and balancing subsidiaries, general ledgers, and historical accounts
- making sure that the books are balanced at the end of the month.
Keeping the record of a general ledger is one of the main tasks of bookkeeping. They keep an eye on vendors making sure they are paying the correct amount and all the invoices are being paid on time.
Accounting: Roles and Responsibilities
Accountant performs their task at a more higher level than a bookkeeper does. Accounting can be considered as a high-level process that uses data recorded by bookkeeper or business owner to give you insights and help to make important financial decisions.
Specialized Responsibilities for Accountants:
- analyzing sales trends
- completing end-of-year financial statements
- helping the business owner making important decisions and understanding their impact
- and handling your tax filing
The main task of an accountant is to make a report which includes all your business financial aspects. The goal is to move the company towards profitability and understanding the cash flow in the business.
They can prove to be a valuable resource by making you aware of potential business growth or uncertain loss. Overall they can perform all the major task that a bookkeeper does plus converting the information recorded by them into insights. Which ultimately helps to make a clear picture of your performance and track.
Difference between Bookkeeping and Accounting
The terms “bookkeeper” and “accountant” can be interchanged to a degree, so I’m going to the center of attraction on the literal job roles.
Many bookkeepers get their start acting as a data-entry clerk or entry-level bookkeeper for a business and grow, through experience and merit, into being a go-to person for the day-to-day financial recording.
The term “bookkeeper” is pretty literal: The bookkeeper keeps the books and holds on to physical documentation for transactions.
A knowledgeable or certified bookkeeper may eventually move into being an accountant (the wording and rules on what a bookkeeper may do and call themselves may be given instructions by state accounting boards).
An accountant may also target reporting, business inquiry and processes, and possible recommendation. Many times the bookkeeper operating as a “feet on the ground” professional, promoting a stronger connection between an accountant and a business owner with bookkeeper and accountant work in tandem.
Both bookkeepers and accountants can acquire the certification, if they choose, through a professional organization such as AIPB (American Institute of Professional Bookkeepers) or the AICPA (American Institute of Certified Public Accountants), respectively.
The terms “bookkeeper” and “accountant” can be used without certification, so it’s valuable to know what qualifications people have, before hiring them.
Bookkeeper vs. Accountant: Which Is Right For Your Business?
How do small-business holders figure out which they need?
Many times it relies on the industry and the level of expertise required. Questions we ask our clients in order to format our services include: What industry is the company is in? Do they keep up a number of fixed assets or a large amount of inventory? How many employees do they have? The more complex the organization, the more valuable it is to make sure that the company’s bookkeeper is also backed personally by a good CPA who can provide advice as and if needed. It’s a great partnership that keeps communication open and data strong.
Also, it’s not a bad idea to ask for client remark and proof of purchase of E&O insurance, which is ready for use to both bookkeepers and accountants.
How valuable are bookkeepers and accountants?
Bookkeepers are, less expensive than CPAs, mainly speaking, which makes them a great choice for a company that needs day-to-day knowledge. A good bookkeeper can also act as the “canary in the tunnel”. They can help you pointing the thing which needs to be optimized. Pricing relies on geographic location and industry, as well as experience.
I would advise calling around to local accounting or CPA firms, other business owners, or even local business-development centers in order to obtain a referral. A bookkeeper is best to construct through word of mouth, and many times you have to look hard because, quite frankly, an excellent bookkeeper gets engaged pretty fast.
I also would highly advise meeting with an accountant or CPA at the onset of a bookkeeper engagement and periodically afterward. Bookkeepers are a considerable way to control, expenses, but having the periodic support of a CPA make sure that you have more than one set of eyes on the books. This not only helps to provide more accurate data but also can act as a deterrent to fraud or theft.
How do you ensure that you appoint a qualified bookkeeper or accountant?
Ask for citation, and call them. If certified, call the board or organization done which the professional is certified. There are also free screening tests on the marketplace, especially for bookkeepers, who may not always be certified and where the onus is more on costly. A referral means a lot.
What other qualities are important?
Be ensure to explore out a bookkeeper and an accountant who can speak to you in plain English. Many financial or accounting professionals attempt this. Also, never be fearful to stand up and say, “I’m not fully accepting what you are telling me. Can you rephrase?” Accounting can be a lot of gobbledygook and is a language all its own. Professionals can be very excellent at what they do, but they also need to be able to explain concepts easily.
A professional demeanor, friendly personality, and honesty are also important. You want to ensure that if there is entity crucial that needs to be discussed, the discussion is timely — and isn’t put off if it’s disagreeable.
When should you appoint a bookkeeper?
The earlier the better. Many holders will try to sort out the information themselves and then have a bumpy ride when it comes time to transition. A good compromise is to ask with an accounting professional when the business is started and then possibly touch base periodically, such as once a quarter. Ask for a quote or pricing, and fit in some sort of periodic meeting into your budget. Errors tend to carry on until taken at year end or the next time a professional looks the books. Books that are set up correctly, in the beginning, can be a strong tool for calculation and progress. Books portion the pulse of a business, and good bookkeeping extends past basic cash expenses.
Moreover, greatest accountants and bookkeepers are satisfied to answer a few questions, and they enjoy being able to look a business becomes larger and for clients to be beneficial. After all, the basement foundation today could be their biggest client tomorrow.
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