Bookkeeping vs. Accounting
In this article we make the distinction between Bookkeeping and Accounting and how to strike a balance for for your business.
Bookkeeping generally involves managing the day-to-day financial transactions of the business—recording sales transactions, reconciling bank statements, and processing payroll. While accounting tends to be more broadly centered on financial guidance and oversight, building on the work bookkeeping does to think strategically about the company’s financial health and growth.
Many small business owners aren’t sure about the difference between bookkeeping vs. accounting. It’s an important distinction and knowing the difference can help you hire the right professionals to advise you in your business.
On the subject, Shelby Morris, office manager at Alexander Advisors in Harvard MA had this to say:
“We work closely with our clients to understand what their comfort level with bookkeeping is in order to tailor an affordable bookkeeping and accounting solution that is specific to their business and ensures that their best interests are accounted for.”
Options can vary widely in how the balance between bookkeeping and accounting is achieved - ranging from monthly, quarterly, semi-annually or annual reviews of the bookkeeping side of things, to provide appropriate guidance on the accounting side of things and to monitor the overall health of the business and manage tax considerations.
As the tax code increases in complexity, tax resolution has become a popular service for many accountants. Also, since accountants are typically knowledgeable about their clients’ personal financial situation as well as their business situation, an opportunity presents itself for more in depth “tax coaching” and financial planning. These two areas of expertise let accountants provide their clients with advanced strategies for their business taxes, enabling their clients to keep more of their hard-earned money in their pockets (or in their retirement funds).
The Bottom Line
Businesses do better when they have a complete picture of their finances, bookkeeping and accounting. Each takes a look at a business’ numbers through different lenses. Engaging both ensures that you receive the best advice for your business.
Bookkeeping vs. accounting does not have to be a choice, rather the two functions can work in unison, helping business owners become more profitable. With insights from both, you get a holistic view of your finances, setting your mind at ease and freeing your energy to do what you love—running your business.