Accounting vs. Bookkeeping - What's the difference?
Bookkeeping and accounting may seem similar, but they differ in how businesses use them. Even though they share common goals, they support your?business in different ways. Understanding the differences will help you make a more informed decision when building your business' finance teams.
What is Bookkeeping?
Bookkeeping is a process which involves systematic record keeping of financial transactions of business. A bookkeeper will do the recording, often as part of an outsourced monthly bookkeeping service like Numbersowl, or an employee. Bookkeepers are responsible for recording every single transaction, reconciling your bank accounts, preparing payroll and aiding the accounting process.Like many business functions, machine learning is having an impact on the humble bookkeeper. No longer is bookkeeping all about data entry, reconciliations, and payment collections. Instead, tools like receipt-bank are reading invoice data, new payments systems like stripe are making credit card collections easier and, platforms like Xero are remembering transactions and automating reconciliations.Automation is moving fast, but amongst all this change, the role of a good bookkeeper is becoming essential. With less data entry to consume a bookkeepers time, bookkeepers are becoming a financial controller of sorts. Making sure processes are sound, transactions are accurate, and you have a live view of your businesses performance that you trust.
What is Accounting?
Accounting is the language of business that builds on the work done by the bookkeeper. Accounting takes the transactions entered and presents them in a way that allows decision making.
An accountants role is often defined by reporting on and understanding the past financial performance. Tools like Spotlight reporting and Futrli are changing this by reducing the time spent on reporting. Instead, time is spent understanding and explaining business trends. These insights when combined with non-financial data help business? manage performance today and forecast the future.
Accounting like bookkeeping is changing.? Accounting for startups to medium sized businesses is more about analyzing the financial data, putting in place robust accounting processes, helping choose the right business software, building models that improve forecasting and measuring business performance.
Similarities and differences
Both accountants and bookkeepers work with financial data and both need to have at least some accounting knowledge. Most bookkeepers handle tend to more than happy to prepare the basic financial statements and act as a financial controller. A good bookkeeper can also?alert you to unusual transactions and signs of cash flow problems.It?s often said that bookkeepers are a dime a dozen, but a good accountant will save you more than the cost.? A bookkeeper will have a basic understanding of accounting, but to be an accountant a Bachelor?s degree is required and often the accounting will also hold a?CPA or Chartered Accountant qualification.A good bookkeeper will lay solid foundations for accountants to analyze data without manual adjustment. Whereas, Accountants help bookkeepers sort out tricky transactions, and provide another set of eyes to make sure accounting records are accurate.
Do you need to hire both?
Yes, an accountant will often step in and handle the bookkeeping when the business is small, but a bookkeeper tends to hand off all accounting tasks to a qualified an accountant. The one you ultimately choose is up to you.? An accountant working alongside your bookkeeper can reduce overall costs by resolving small problems before they become costly.With a modern accounting firm, cloud technology like Receiptbank and Xero means having an accountant and bookkeeper on your team is affordable.?Saving your hours that could be better spent managing your business.