Most people think about bookkeeping vs accounting interchangeably despite being quite different. While bookkeepers and accountants have similar goals, they support your business at different points of the financial cycle.
When bookkeeping and accounting for your small business become too much to handle, it’s time to seek help. But do you need a bookkeeper or an accountant? Here’s everything you need to know to figure out which is best for you.
Bookkeeping
A bookkeeper keeps track of and categorises a business’s daily financial activities. Their focus is on maintaining accurate records rather than evaluating data and analytics.
The bookkeeper’s records will influence the accountant’s advice for management and the general health of the business.
Typical bookkeeping tasks include:
- Recording Financial transactions
- Posting debits and credits
- Generating invoices
- Payroll management
- Maintaining and balancing ledgers, accounts, and subsidiaries
One of the most important aspects of bookkeeping is keeping a general ledger. It is a document that records the amounts received from sales and expenses. This is known as posting: the more sales performed, the more often the ledger is posted.
All sales and purchases made by your business must be recorded in the ledger, and certain transactions require supporting paperwork. The IRS specifies which business transactions need supporting documentation.
Advantages
Bookkeepers can help you track and organise your financial documents and reports, thus providing extensive records for you to refer to. This could potentially save you money in accountant costs.
They often charge less than accountants for their services. However, tThe exact fee depends on the quantity of paperwork and documentation required.
While accountants provide extensive evaluations, a bookkeeper can give basic views of your business’s financial situation.
Accounting
An important element of the accounting process is analysing financial data to help you make business decisions. As a result, you’ll have a greater knowledge of your business’s profitability and cash flow. Accounting transforms information from the general ledger into insights that highlight the bigger picture of the business and its growth.
Accountants can help owners with:
- Strategic tax planning
- Financial analysis
- Forecasting
- Tax filing
An accountant builds on the data provided by the bookkeeper. In most cases, they’ll:
- Examine the financial statements created by the bookkeeper
- Analyse and interpret this data
- Make a report out of the information (or records)
- Share thoughts based on what they’ve reported
Advantages
Working with an accountant will help avoid the pitfalls many businesses encounter. This covers issues such as failing to register for VAT on time or purchasing a car under an individual’s name and then claiming it as a corporate vehicle.
Furthermore, there are many things your business may be able to claim that you are unaware of.
As it’s an accountant’s job to alert you about these things, hiring professional help can often save your company money.
You can read more about the costs you can (and cannot) claim by clicking here.