It may cause a headache or two but bookkeeping is essential for the function of every small business. Aside from the importance of organising and maintaining financial records, efficient bookkeeping enables you to highlight any monetary issues that need to be addressed.
It is common to mix up the roles of a bookkeeper and an accountant. While the two work in tandem, they sure do have a lot of differences that set them apart. Something they do share in common, however, is that they both play a role in achieving financial success. Want to find out more?
This blog is designed to explain the key differences between bookkeeping and accounting and how Bri could become your new best friend when it comes to alleviating some of those administrative tasks!
What is Bookkeeping?
Put simply, bookkeeping is the recording of all financial transactions of the business such as receipts, sales and purchases, payments, invoices, etc. In other words, if it’s to do with money entering or leaving the business, it’s recorded under bookkeeping.
Primary tasks involved include:
- Recording financial transactions
- Maintaining accurate records of income and expenditures
- Posting debits and credits
- Producing invoices
- Maintaining and balancing subsidiaries, general ledgers, and historical accounts
With a list of tasks as long and time-consuming as this, it’s no wonder that people often opt for special bookkeeping tools and software. These can be a great way of minimising your workload when it comes to bookkeeping. Your data lives online which means you can easily access it from any location or device and all the relevant parties can log in to view financial information instead of having to request it from you. Wait times are reduced, simple or redundant tasks are automated, and you can even take your organisation game to a whole new level with visual summary dashboards.
Not only does it speed up the process, electronic bookkeeping software can also be relied upon to be extremely accurate so you can sleep soundly knowing all your records are correct and up-to-date!
What is Accounting?
Where bookkeeping is all about the administrative side of things, accountancy deals more with the financial side. Accountants will gather all of the recorded information from bookkeeping and provide insights on the business through in-depth analysis of the organised data. This is why it’s so important to maintain well-organised records of business transactions. Bookkeeping allows accountants to provide new cash flow strategies and accurately assess the financial health of the business.
Primary tasks involved include:
- Interpreting, classifying, analysing, reporting and summarising financial data
- Preparing financial statements, such as income statements, balance sheets, and cash flow statements
- Conducting audits
- Providing tax advice and preparing tax returns
- Offering strategic financial advice and forecasting
As the role of accounting has a much broader scope, it is usually handled by a qualified professional. The advanced nature of tasks carried out means people need the correct certifications, such as CPA.
Bookkeeping vs. Accounting: Key Differences
It can sometimes feel like the line between bookkeeping and accounting becomes a little blurry, right?
Well, it’s all a matter of differences in scope and complexity. Think of bookkeeping as small scale management and accounting as large scale management. Bookkeeping focuses on the day-to-day recording of transactions, accounting focuses on the bigger picture of financial health through analysis and reporting.
There is also a big difference in the objectives and required skills and education to undertake each role:
| Bookkeepers | Accounts |
| Ensure records of financial transactions are accurate and up-to-date | Aim to interpret and provide insights from financial data to aid decision-making |
| Need to be detail-oriented and proficient with bookkeeping software | Require analytical skills and a strong understanding of accounting principles and regulations |
| Seen as the first step of the accounting process | Rely on the accurate records maintained by bookkeepers |
The Importance of Bookkeeping and Accounting in Business
In many ways, the two are interdependent, with bookkeeping being seen as the first step in the accounting process. Comprehensive accounting isn’t possible without accurate bookkeeping so it’s a no-brainer why both work together to ensure regulatory compliance and preparation for audits.
To summarise, the effective financial management of a business relies on precise bookkeeping and accounting. But hey, we know this can be easier said than done!
Between taking care of your business, day to day tasks, and ensuring client satisfaction, it’s easy for the weekly workload to become overwhelming. It’s why investing in accurate bookkeeping and professional accountancy services can be one of the best decisions you ever make for you and your business.
Using software to simplify the bookkeeping process, you’ll find it’s easier to maintain records for your business. The result? You become better-equipped with the right knowledge to make decisions about budget, planning for the next fiscal year and taxes, to name but a few.
How Can We Help?
With over 15 years of experience in the industry, Baa Accounting are professionals who are more than highly experienced to handle your individual bookkeeping needs.
Like what you see? We though you might! For as little as £25 per month, Digit is your new bookkeeping solution. He’ll be your new best friend who’s excellent with numbers. We’ll get your set up on FreeAgent, help with your bookkeeping tasks & provide you with an annual account review.
Want to get in touch? We’d love to chat with you! Follow this link to our bookkeeping service, to learn more about our services and exactly how we can help you.
