Running a business often means juggling a multitude of projects all at once. When choosing where to put their focus, many SMEs concentrate on driving sales and delivering for clients.
Generating growth is vital – but so is looking after the numbers while you do it.
A growing number of small businesses are choosing to outsource their financial housekeeping to third parties. However, finding the right service provider for your needs can get tricky.
This is especially true if you’re unclear on the distinction between bookkeepers and accountants.
That’s right – they aren’t the same role. While they ARE both critical to managing your business’s finances, they traditionally have a specific – and separate – set of skills to benefit your business at each stage of its financial cycle.
In this guide, we’ll cover what the difference is between bookkeeping and accounting – as well as why you really do need both if you want your business to run smoothly!
What is bookkeeping? A bookkeeper’s main role is to process the daily financial transactions for your business. ‘Daily transactions’ means the money coming in and going out.
Keeping a close eye on the numbers is obviously top priority. A lack of attention to these details can result in a loss of profit, or – in a worst case scenario – even debt.
Vigilant tracking of expenses, assets, liabilities and cash flow is essential to your business’ financial health and growth.
Accurate data entry is the foundation of bookkeeping. A bookkeeper will make sure the numbers match bank statements and any other supporting documentation.
Depending on the business requirements, this could include recording sales, sending invoices, tracking customer payments, recording the payment of suppliers, paying overhead expenses (rent, utilities etc.) and payroll.
As a business, you are likely to generate your fair share of paper ( such as purchase invoices, receipts and expense claims). Thanks to software advances, basic data entry is now largely automated. Gone are the tedious days of inputting transactions into spreadsheets, or worse – using pen and paper!
However, as with all AI, things don’t always ‘compute’. System errors, random bugs and glitches can still occur and jumble up the numbers. And while ‘turning it off and on again’ still bizarrely seems to mend the odd technical difficulty, it won’t fix a botched report.
Bookkeepers will definitely make use of small business bookkeeping software to streamline their job. But they’ll also be on hand to sort things out if they go sideways (and they’ll do it quickly, too).
Note: While most bookkeepers do undergo training and earn relevant certification, no formal qualifications are needed to become a bookkeeper. This means that – while they are whizzes at tracking and managing your data – most aren’t qualified to help you file your business tax return and company accounts.
This is where accountants come into the picture.
The role of accounting in business is best defined as performing a high level of financial analysis.
These professionals go through vigorous training and standardised exams to become qualified in the field. Using the data recorded by the bookkeeper, an accountant will produce financial models and provide strategic advice for growth.
A good accountant will help you:
Essentially, while bookkeepers accurately record your data, accountants use the financial information recorded to reveal the bigger picture of how a business is performing – and plot its path to progression.
Why is accounting so important? Regardless of your business size and model, if you want it to succeed, you need to outsource your books.
Organised financial records by a bookkeeper, coupled with smart financial strategy and tax filing from an accountant is the winning ticket. With it, your business can board the bullet train of success.
At Addition, we believe that every business, however small, deserves the best of both worlds.
Our low rate monthly plans are designed to work – and grow – with your business and can be adapted to whatever services your business requires.
Our end-to-end solutions combine bookkeeping and accounting services into single, affordable packages so you can level up today.
Let’s get busy tailoring a plan to suit your business needs!