Bookkeeping vs. Accounting: Which Does Your Business Really Need?

Small business owners are often caught up with the nitty-gritty of bookkeeping and accounting. Oftentimes, you may have been using the two words interchangeably and are unsure how each is distinct and contributes to your business’s financial health.

So, you are looking for small business accounting in Oakland County, MI. In that case, it is also important to appreciate the differences between these two functional areas to decide what your business requires.

Both bookkeepers and accountants handle financial information related to a business but do so in different capacities. This article will further explain the difference between bookkeeping and accounting, which will assist you in choosing the right type of services for your company.

What Does a Bookkeeper Do?

A bookkeeper is primarily focused on managing a business’s day-to-day financial transactions. This includes monitoring income, expenses, and other financial activities on that day. If an accountant is going to prepare a monthly report, it is the bookkeeper’s role to keep those records updated and organized so they can be presented to the accountant. Still, the bookkeeper does not prepare the report.

A bookkeeper has the following duties:

• Account Matching: Account matching involves comparing the transactions in the books with those that the bank has reported to see if they are aligned to ensure accuracy.
• Maintaining Financial Records: Bookkeepers ensure that all daily financial activities are recorded in the books and that all expenses and revenue are captured, as these will be needed later.
• Creating invoices and monitoring overdue debtors: The bookkeeper’s responsibility is to issue invoices and inform clients of their overdue payments. The bookkeeper will also note that once payment is made, the debt is cleared.

The Role of an Accountant

On the contrary, accountants can become certified after completing their training. They can analyze information so the business can see more details within the numbers, encouraging them to work and provide employment. Their responsibility is more strategic because it combines recording, data analyzing, planning business processes, tax compliance, and even identifying how successful your business is going to be.

• Preparing Financial Statements: Creating balance sheets and disclosing such documents to employees along with other constituents, such as income statements, is necessary for any entity, especially its owners, to know exactly the company’s financial resources.
• Reconciliation: Similar to Bookkeepers, Accountants also tend to check the company’s bank statements and report discrepancies not presented in the company’s books. They seek to investigate whether such discrepancies reoccur and why these variances may exist.
• Budgeting and Forecasting Reports: Accountants prepare reports with information that would answer employees and other business executives about how the organization’s finances may vary over time or during set intervals and how shifts within the external environment could impact the organizational finances.
• Tax Filing: To avoid any legal complications, accountants are responsible for ensuring that all taxes, such as income and employment taxes, are properly filed and that all the required returns are completed during the year on behalf of the organization.

Why Both Roles Matter

Every business must have a perfect combination of bookkeepers and accountants because neither would be able to perform their functions perfectly without the other. The role of a bookkeeper is to ensure that the business carries out effective and efficient maintenance of the financial records and that the company does not spend more than what it earns. Thus, the accountant will be able to capitalize on the provided data.

Furthermore, efficient bookkeeping enables accountants to receive accurate data, minimize mistakes, and thus assist the business in making correct decisions. Additionally, the company’s owner offers the relative expertise needed to expand the organization with the bookkeeper’s assistance.

Conclusion

Bookkeeping and accounting are both vital functions for your small business’s welfare. If you are looking for small business accounting, getting an expert’s assistance would ensure your records are kept in order, and your financial measures are designed for the future.