Many a time, businesses don’t succeed because of poor accounting. However, if you engage some expert and qualified bookkeeping agency and accountants, your business will only flourish. Having said that, it’s important to first understand the basic differences between bookkeeping and accounting.
What is Bookkeeping?
A bookkeeper assists you in recording all the monetary transactions of an enterprise. Any small business too incurs losses, makes profits and has to keep accumulating receipts every day, which all need to be recorded date-wise.
Though these days, there are many good accounting software which helps in automating the bookkeeping work. But there are bookkeepers who would even classify and then summarize your financial data. Such bookkeepers are termed, full-charge bookkeepers.
What is Accounting?
Accountants help in examining and evaluating your financial records. They put all the accounting principles and requirements in practice while they construe a company’s financial data. They also create financial reports, which help in checking and guiding the financial planning and performance of a business.
In larger organizations, at times accountants also administer the tasks done by bookkeepers.
How is Bookkeeping different from Accounting?
In many businesses, at times bookkeepers and accountants work hand-in-hand and manage the complete accounting process. But in some smaller enterprises, bookkeepers usually handle more of the accounting process.
Though both accounting and bookkeeping are imperative in the functioning of a business, it completely depends on how both these tasks are managed and by whom.
Here is a list of some key differences between bookkeeping and accounting.
|This is a process in which we summarize, probe, interpret and communicate financial transactions of a business which are classified in their ledger account||The process of finding, measuring, and then recording all the financial transactions|
|Accounting data helps the management of a company to take important business decisions||Bookkeeping data doesn’t help in any decision-making|
|The objective of this process is to determine the financial condition of a business and then communicate it to the management or authorities||The objective of this process is to records all the monetary transactions in a proper and systematic way|
|Financial statements are made in this process||No financial statements are made in this process|
|Specific skills are needed to analyze the complex data||This process doesn’t need any particular skills|
|The bookkeeping information is used in this process to further examine and construe the data of a company and then create reports out of it||No analysis is required in this process|
|The accounting department does preparations of a company’s budgets and plans loan proposals||Basically there are two types of bookkeeping – Single entry and double entry bookkeeping|
|Accountants require to have experience and training to do this and can gain a title of Certified Public Accountant (CPA)||Bookkeepers need accuracy and knowledge about financial subjects. However, their work is mostly reviewed by an accountant|
Opting for the correct financial services for your business
As the success of your business depends on the accuracy of your financial transactions, the analysis of this data needs to be accurate so that correct business decisions are made. It is always advisable to hire a professional or experienced service-provider, who can take care of these tasks for you.
Hiring an accountant and also a bookkeeper is a good idea as it secures your business from all angles. Mostly, small businesses take services from a third party accountant.
Many small businesses also use bookkeeping software available in the market. Then these records are given to an accountant for further analysis and reporting.
However, bigger companies mostly use professional bookkeepers or hire an in-house accounting team. What you decide completely depends on the size of your business and its profitability. Hiring a professional firm may surely help you reap various finance and accounting outsourcing benefits. If you have any questions around this, do contact us at IMC and we would be happy to help.