What Is The Difference Between A Bookkeeper And An Accountant?
Being a small business owner could be both one of the most rewarding careers and one of the most stressful. After all, you are going to be fully responsible for the outcome of the business venture – whether it grows to become a prosperous company or if it is going to be yet another business idea that could reach its full potential.
Many small business owners have to juggle several vastly different roles as they try to navigate the economic environment, negotiate deals, put their products or services out there, and attract customers, among all the other tasks. However, one aspect of any business that may be best left to the experts is accounting.
Indeed, no business can hope to grow and expand without having reliable financial data about its operations and ensuring that it meets all of its tax obligations and regulations. Nowadays, accounting firms offer suitable packages of services so that even small companies, which typically have limited resources, could still afford them without breaking the bank.
Looking for professionals in your area, such as a small business accountant London, may be a wise decision as it will leave the owner and their team free to focus on the more important tasks. One crucial question that may crop up is whether you need a bookkeeper or an accountant. While the two terms are often used interchangeably, there are actually several essential differences between them.
Bookkeeping And Accounting Are Not The Same
Bookkeeping and accounting may be connected, but they are two separate roles with distinct requirements and obligations. Bookkeeping involves the day-to-day responsibilities of recording financial transactions, such as purchases, receipts, sales, and payments. It is primarily an administrative function that generates data about an organisation’s activities.
In contrast, accounting is a more subjective field that analyses the information obtained from bookkeeping to provide business owners with financial insights as well as compiling and submitting tax documentation. Accounting involves the process of converting data into information that can be used to make informed decisions.
In simpler terms, bookkeepers are responsible for recording financial transactions, while accountants provide analysis and generate reports based on that information. Bookkeeping generates data, while accounting turns that data into useful and actionable information.
Main Responsibilities Of Bookkeeping
Bookkeeping is a critical aspect of small-business management that involves maintaining accurate records of all financial activity. To achieve this, bookkeepers must be closely involved in the day-to-day operations of the business.
Recording transactions is an essential task that involves documenting every financial movement, including sales, purchases, and bills, in a general ledger. The ledger provides a comprehensive overview of each financial account, including credits, debits, and balances. For businesses looking to streamline this process, especially when dealing with bank statements, convert bank statements to Excel can be an invaluable tool. This not only simplifies the recording process but also enhances the accuracy of financial data management.
Reconciling bank statements is another crucial responsibility that ensures that recorded transactions align with the bank statement for that month. Preparing financial reports, such as the profit and loss statement, balance sheet, and statement of cash flows, is also part of the bookkeeper’s role.
Bookkeepers are responsible for managing accounts receivable and payable, which includes sending invoices, tracking overdue payments, and ensuring that vendors are paid promptly. Additionally, managing payroll is another typical responsibility that involves calculating deductions, processing payroll, and ensuring that employees are paid accurately and on time.
The Tasks Expected Of An Accountant
While bookkeepers focus on the details of financial transactions, accountants take a broader perspective. They provide valuable services such as preparing and filing tax returns, which can help minimise tax liability and reduce the risk of errors that could lead to an audit by the authorities.
In addition, accountants offer financial planning advice, helping business owners choose the best structure for their company and offering guidance on financial forecasts and planning. They can also be helpful in the process of applying for business loans, as they have a comprehensive understanding of a company’s finances and can advise on interest rates, terms, and conditions.
Unlike bookkeeping, to work as an accountant, individuals are required to meet certain qualifications based on their experience, licences, and certifications. Typically, accountants need to have a bachelor’s degree from an accredited college or university.
In order to enhance their skills and secure positions within larger organisations, accountants often obtain various accounting certifications. These include the CPA credential, as well as other common designations such as chartered financial analyst (CFA) and certified internal auditor (CIA).
How To Know Which One Is Best For Your Business?
If you own a small business, it’s advisable to hire a professional accountant to handle your tax returns. Some entrepreneurs choose to manage their own bookkeeping tasks, and some professional software products can definitely help make the process more efficient. However, as the business grows, delegating these duties to a dedicated bookkeeper can help reduce their workload and enable them to concentrate on other areas of their enterprise.
