In this blog post, I share the Bookkeeping vs Accounting – actual advantages and how to recognize them for any type of business. I also compare bookkeeping with accounting to help entrepreneurs understand the benefits of both for business success.

Being a small business owner, paying close attention to your finances is VITAL for the survival and growth of your business.

You can perhaps manage much of your Bookkeeping on your own with some time and resources, but when you look at your numbers and feel lost, it might be time to call in an expert.

Understanding when to use a financial professional can save you not only valuable time and money but also guard you against pitfalls from Government regulations. Understanding exactly what type of professional you need is equally important.

Usually, it comes down to satisfying one or more of these needs: Bookkeeping vs Accounting – actual advantages for your Business.

Bookkeeping and Accounting are connected, but the difference between hiring a bookkeeper and hiring an accountant is remarkably significant.

BOOKKEEPING vs ACCOUNTING – Recognize the actual advantages

The first key point is understanding the difference between the type of service offering:

Bookkeeping vs Accounting

and then understanding how each of these services is provided by the type of professional:

Bookkeeper vs Accountant

and realizing how they can help you optimize your opportunity for growth.

Bookkeeping and Accounting defined

Bookkeeping is the record-keeping process of tracking your Income, Expenses, and Assets.

Accounting is the compiling process of all account information through reporting and then analyzing this information to enable better business decision making.

Actual Advantages of a Bookkeeper for your business

Bookkeepers usually:

• Record purchases for stock, assets, and keep track of day to day operations
• Invoice customers, receive their payments, and issue statements
• Process supplier bills and payments and reconcile their statements
• Balance the general ledger accounts and reconciling the Bank Statements of all Business Accounts
• Process payroll and all journals into the General Ledger
• Reports to the Accountant monthly

Actual Advantages of an Accountant for your business

Accountants usually:

• Generate Company Reports such as the Trial Balance, Profit & Loss Statement, and Statement of Financial Position
• Prepare the Management Reporting
• Draft the Annual Financial Statements
• Analyze the cost of all operations and do a Ratio Analysis calculating the Gross Profit Margins
• Prepare the Tax Computation and calculated estimated taxable profits
• Advise Small Business owners on how to save on taxes and increase their GP %

How Business Bookkeeping data is used

• Bookkeepers record your Small Business’s daily transactions and generate data.
• Bookkeepers record transactions using a uniform method. Bookkeepers record data, in the same way, every time.

How Business Accounting data is used

• Accountants verify recorded data about your financial activities.
• Accountants make sense of your data and turn it into reporting and financial statements.
• Accountants look at the big picture view of your Small Business’s finances.

Nature of the Bookkeeping job

• Bookkeeping is transactional.
• Bookkeepers enter information from each transaction and compute figures.
• This means bookkeeping is cyclical.

Nature of the Accounting job

• Accounting is subjective.
• Accountants examine your financial information from a subjective point of view, using their expert knowledge to interpret data.
• Accountants look for patterns in your records to help you make business decisions impacting the future of your Small Business.

Recognize when you need the help of a financial professional

Bookkeepers are needed when you could use help keeping your books processed and balanced.

For example, your business may be growing too fast for you to do your own bookkeeping. If you have room in your budget, you might consider hiring a bookkeeper so you can focus on profit-making responsibilities.

Choosing to hire a bookkeeper as an employee or as an Independent Contractor will be determined by the type of Business you manage, your day-to-day requirements, and how you would like to invest in resources.

Accountants are needed when you must make sense of your financial information.

You need someone who understands profitability, cash flow, and financial planning. An accountant can advise you on the most financially savvy moves you can make based on your history. An accountant will also help you with year-end business tax planning and filing.

Because you only need an Accountant periodically, it makes better sense to outsource this expert service to an Independent Consultant on terms that will assist your Business to benefit from it.

BOOKKEEPING vs ACCOUNTING – Actual Advantages for your business

While bookkeeping and accounting differ, they have overlapping functions.

Both play an important role in informing you about your business’s health and projecting future outcomes.

Bookkeeping is the foundation of your finances while Accounting takes care of higher-level processing.

For example, let’s say you offer a coupon to your customers.

• You use Bookkeeping to record how many coupons are used.
• You use Accounting to look at how the coupons affect your finances and the health of your business.

As a small business owner, you can record your books with a do-it-yourself approach.

If you decide to use a financial professional – a qualified Bookkeeper – make sure you hire someone with credentials that match your needs. The more complex your financial situation is, the more likely you will need a registered Accountant.

Prepare to meet with your financial professional

You can help your financial professional get you accurate, meaningful answers about your finances.

When it comes to your business Bookkeeping and Accounting, knowing the difference and recognizing the advantages can help you prepare for working with the right financial expert.

When you hand records over to an accountant, make sure your General Ledgers are organized and correctly balanced. Usually, this forms part of the Bookkeepers’ tasks.

While your accountant examines your books, keep the communication lines open. If you don’t understand the financial jargon that your accountant uses, speak up, and ask questions.

Preparing to meet with your financial professional cuts down on time, which saves you money and a lot of headaches later.

Do you need a simple method for tracking your small business finances?

Try our online small business accounting software for accurate, up-to-date records.

Get a free trial today.

If you need further advice on understanding the differences between a Bookkeeper and an Accountant, or you need to take the next step to find the right kind of professional expert, reach out to me for ways I can assist you and your Small Business.

You are also invited to join my virtual community in my FREE Facebook Group, Profitable Online Creatives, for a community of Entrepreneurs and Small Business Owners to help, support, and empower each other!

Because I am a heart-centered entrepreneur, passionate about helping other entrepreneurs build profitable online businesses, I created a 6-Step Roadmap to starting a profitable online business.

You can grab this free training here.

See you online!