AccountingBookkeeping

Bookkeeping vs. Accounting: What Does Your Business Need?

By August 30, 2019 No Comments

bookkeeping vs accountingMany people use the terms bookkeeping and accounting interchangeably because of their overlapping duties. However, bookkeeping and accounting are not the same, and their differences could mean significant things for your business. Bookkeepers and accountants share similar goals, but they support different parts of your business. 

Your financial service needs will change depending on the size of your company, how often you need financial assistance, and what your revenue is. Those numbers will determine whether your business needs bookkeeping vs. accounting

So what’s right for you and your business? With this guide, we’ll help you distinguish the two and figure out which financial service is the best fit for your company. 

What does a bookkeeper do? 

The role of the bookkeeper is to record financial transactions, maintain updated financial records, and to generate reports with that information. Bookkeeping is a crucial component of a successful business, and it includes the following duties: 

  • Managing accounting software
  • Issuing customer and supplier invoices
  • Maintain cash receipts and the petty cash fund 
  • Conducting monthly reconciliation 
  • Executing payroll 
  • Handling a general ledger and historical accounts

Primarily, the duties of a bookkeeper are designed to manage the day-to-day transactions that make insight into your business’s finances clear and easily digestible. If your finances are updated and ready to deliver to potential investors, inform your stakeholders, or fill out tax documents, your bookkeeper is doing a good job. 

If you don’t currently have a bookkeeper or are managing the bookkeeping duties yourself, check out our step-by-step guide to optimizing your bookkeeping functions here

What does an accountant do? 

Now that you know what a bookkeeper does, it’s time to understand how and why accounting is different. The role of the accountant is to help businesses use their financial records to make strategic financial decisions. To do that, accounting duties also include: 

  • Preparing business financial statements 
  • Analyzing operational costs 
  • Managing income tax returns 
  • Projecting and analyzing the impact of financial decisions 
  • Establishing business practices 
  • Creating budgets 

Ultimately, accounting is designed to be the next level of financial services for businesses that have moved beyond the basic needs of bookkeeping.

Bookkeeper vs. Accountant: Which One Do I Need? 

Now that you understand the basics of the “bookkeeping vs. accounting” argument, it’s time to decide which financial services are right for your business. To help guide your decision, answer the questions below to find out what you need to based on your current business goals: 

  1. Do you need someone to manage customer billings and payment? 
  2. Are you behind on preparing and sending invoices? 
  3. Has it been a while since your checkbook was balanced? 
  4. Are you worried about meeting your annual tax requirements concerning payroll? 
  5. Are you looking to scale in the next 3-6 months? 
  6. Do you need help deciphering what our business finances mean for your business? 
  7. Have your sales increased but your profits haven’t? 
  8. Do you have more than 40 employees? 
  9. Do your annual profits exceed $4million? 

If you answered yes to questions #1-4, you need bookkeeping services. Bookkeepers can be hired on a part-time or full-time basis, and can also be in-house or contracted out. At Acuity, we offer bookkeeping services on a daily, weekly, and monthly basis, so businesses can get the services they need, and none that they don’t. 

If you answered yes to questions #5-9, you need accounting services. If you’re already working with a bookkeeper, bringing on an accountant will make for a smooth transition. If you aren’t, we can help you get set up with both bookkeeping and accounting services on an outsourced, as-needed basis. That way, you have the flexibility to meet as much or as little as is necessary, and you can get back to being focused on your business. 

Your Key Takeaways in the Bookkeeping vs. Accounting Debate 

In recap, here’s what we’ve learned about bookkeeping and accounting and how they affect your business. 

KEY TAKEAWAY: The financial services you need are dependant on the size of your company, your annual revenue, and how often you require expert financial assistance in your day-to-day. 

KEY TAKEAWAY: Bookkeeping is primarily a task-oriented function: managing expenses, recording cash flow, maintaining petty cash. Accounting is all about helping you see what your finances are trying to tell you. Bookkeeping and accounting functions can be part-time or full-time, depending on your business’ needs. If you need services but don’t want to commit to an in-house employee, virtual bookkeeping services or outsourced accounting services can help take your business to the next level. Talk with one of Acuity’s experts to learn more today.