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 bookkeeping vs accounting. 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 the difference between bookkeeping and accounting – as well as why you really do need both if you want your business to run smoothly!
What Does A Bookkeeper Do?
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.
1. Keeping an eye on the numbers
A lack of attention to your financial details can result in a loss of profit, or – in a worst case scenario – even debt. Your bookkeeper should give you heads-up if things aren’t adding up.
2. Tracking of your business figures
This includes expenses, assets, liabilities and cash flow – all of which are essential to your business’ financial health and growth.
3. Accurate data entry
A bookkeeper will make sure the numbers match bank statements and any other supporting documentation. This could include: recording sales, sending invoices, tracking customer payments, recording the payment of suppliers, paying overhead expenses (rent, utilities etc.) and payroll.
4. Flagging AI errors
Thanks to software advances, basic data entry is now largely automated. 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).
TOP TIP: While most bookkeepers do undergo training and earn relevant certification, formal qualifications are not a must for bookkeepers. So while they’re whizzes at tracking and managing your data, most aren’t qualified to help you file your business tax return and company accounts.
What Does An Accountant Do?
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:
- Get the best return on your tax filing
- Identify growth and funding opportunities,
- Analyse the cost of operations
- Plan capital purchases or other investments
- Strategize how to scale your business
To answer the bookkeeping vs accounting question simply: 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.
Do I Need An Accountant And a Bookkeeper?
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.
Want Some Help With That?
At Addition, we believe that every business, however small, deserves the best of both worlds. Our CORE plan works – and grow – with your business, with add-ons like Self-Assessment and Payroll for when you’re ready to level up.
To find out more about CORE, book a call with our team today.