When most people think about bookkeeping and accounting, they would be hard-pressed to describe the differences. While bookkeepers and accountants share common goals, they support your business in different stages of the financial cycle.
Bookkeeping is the process of recording daily transactions in a consistent way, and is a key component to building a financially successful business. Maintaining a general ledger is one of the main components of bookkeeping. The complexity of a bookkeeping system often depends on the the size of the business and the number of transactions that are completed daily, weekly, and monthly.
Accounting is a high-level process that uses financial information compiled by a bookkeeper or business owner, and produces financial models using that information. The process of accounting is more subjective than bookkeeping, which is largely transactional.
The process of accounting provides reports that bring key financial indicators together. The result is a better understanding of actual profitability, and an awareness of cash flow in the business. Accounting turns the information from the ledger into statements that reveal the bigger picture of the business, and the path the company is progressing on. Business owners will often look to accountants for help with strategic tax planning, financial forecasting, and tax filing.
Organized financial records and properly balanced finances produced by the bookkeeper, coupled with smart financial strategy and accurate tax filing by the accountant, contribute directly to the long-term success of every business.
Some business owners learn to manage their finances on their own, while others opt to hire a professional so that they can focus on the parts of their business that they really love. Whichever option you choose, investing—whether it be time or money—into your business financials will only help your business grow.