Most business owners can’t easily discern the main differences between bookkeeping and accounting; however, both are necessary for business growth and accurate reporting. Understanding the specifics of bookkeeping and accounting can help you differentiate the two to properly incorporate both into your business.
Bookkeeping
Bookkeeping involves administrative tasks found in the day-to-day operations. Think of recording invoices or depositing checks into the bank. Accounts payable and accounts receivable specialists fall into the bookkeeping category. Other common tasks bookkeepers frequently complete include processing payroll, preparing bank reconciliations, preparing the books for an accountant, drafting year-end financial statements, and taking care of any other general items that may come up throughout the day. Bookkeepers commonly use a software program to help keep track of the chart of accounts and financial information.
Accounting
On the other hand, accounting is more subject, focusing on the overall financial health of your business through drafting financial statements and reports. Common accounting tasks include preparing adjusting journal entries, analyzing financial reports, making business decisions, assessing overall financial health, and preparing tax returns. Cash flow management procedures are also a critical function of proper accounting procedures, ensuring your business is maintaining strong cash levels to support operations. Some of the accounting tasks might be outside of the scope business owners are comfortable with, which is why an outsourced accounting professional is brought on.
The Importance of Both
Both bookkeeping and accounting are key components of running a successful business. Bookkeeping on a regular basis can allow your business to have stronger control over the business financial health, which can lead to access to new funding and investment sources. Additionally, bookkeeping sets the foundation for accounting policies, making it important that both are effectively implemented in your business. Financial statements and tax filings are produced from accounting and bookkeeping procedures, which regulatory agencies require to be accurate to avoid fines and penalties.
Summary
Experience is needed for both bookkeeping and accounting in order to complete the procedures accurately. As a small business owner, you might not retain the applicable knowledge and experience. Furthermore, hiring an in-house bookkeeper can be expensive and outside of your budget, making an outsourced bookkeeper like Tax Geaks a great solution. Tax Geaks has been assisting clients from a wide variety of industries on various bookkeeping and accounting tasks for years, bringing expertise and accuracy to your small business. Free up extra time in your schedule all while ensuring your bookkeeping and accounting is properly maintained with Tax Geaks.