Accurate and complete financial records are essential to the success of any business. Bookkeeping and accounting are two processes business owners rely on to track and understand their finances.
Actually, the line between bookkeeping and accounting processes is becoming blurrier all the time. Technological advances in hardware and software have automated many of the traditional tasks that used to require manual skills.
For now, though, we can still look at bookkeeping and accounting as being two separate processes. Here’s what sets them apart and how each supports your business.
What a Professional Bookkeeper Does
The function of a professional bookkeeper is to monitor money in and out of your business using receipts and other documentation. More specifically, a bookkeeper:
- Records financial and banking transactions
- Tracks debits and credits
- Produces invoices and process payments
- Maintains employee payrolls and cut checks
- Ensures proper taxes have been withheld
These tasks are typically done on some routine basis – daily, weekly, or monthly.
Books were traditionally kept on paper ledgers, but bookkeeping today generally requires computer spreadsheets or, more commonly, bookkeeping software. Technology makes it easier to record, categorize, collate, summarize, compare, and report financial information.
Professional bookkeepers aren’t required to have a college degree, though most have completed at least a two-year course of study at a university or business school. They’re characterized by a keen attention to detail and the ability to classify and prioritize. They realize that crucial business decisions, as well as loan and investment assessments, are often made based on the information contained in the books.
What a Professional Accountant Does
Accounting is a higher-level process that’s often more subjective than bookkeeping. Typically, an accountant:
- Prepares company financial statements
- Analyzes the costs of operations
- Completes income tax returns
- Represents you in an audit
- Models business plans using bookkeeping data
- Offers strategic business advice
Accountants look at the big picture of your business. The reports that accountants prepare offer key financial indicators that allow you to make more informed decisions about the direction of your business. In the end, you get a better awareness of the cash flow of your business and a higher understanding of your actual profitability.
Professional accountants generally have a four-year college degree in finance or accounting. They can also become a certified public accountant (CPA) by undergoing rigorous study and testing to do so. Accountants use smart business sense, as well as a deep knowledge of finance and taxes, to support your business. They often think outside the box to deliver business solutions you may not have thought about yourself.
Hiring a Bookkeeper or Accountant
It’s also wise to hire someone who understands current technology and can help you automate many of your bookkeeping or accounting processes. Having financial information at your fingertips can help ensure that your business is moving forward with confidence.