People who are just starting a new business may find it difficult to keep track of all the things that should be done as well as various functions and responsibilities that people in one company have.
Some people simply start piling up the work on themselves, which is probably not the idea you had in mind. Running a successful business means learning to recognize the way the overall tasks should be delegated.
If you’re new to this, you’re probably confused about bookkeeping and accounting, because it may seem like these two things are the same, but there are some differences. Keep reading if you want to get familiar with all the differences and similarities that these two positions have.
What does the bookkeeping refer to?
Bookkeeping refers to keeping track of your financial records and following through all of them, so if your company made a transaction it will be on the record. When someone pays you money, it will also be identified, measured and recorded, so you will have this information anytime you need it.
Basically, every dollar that goes in and out of your account will be in the bookkeepers’ records. The goal of bookkeeping is to have all the financial transactions recorded and systematized that can easily be found whenever needed. Bookkeeping includes writing invoices, managing a payroll, posting credits and maintaining subsidiaries and general ledgers.
A general ledger refers to a document for bookkeeping records of sale receipts as well as the expenses. A ledger can be made with the help of specialized software, a spreadsheet, or a sheet of paper. Bookkeeping for a small business is much simpler than bookkeeping for a corporation that requires a complex approach to making sure that all the transactions made are precisely recorded. A bookkeeper doesn’t need to have any particular skill to do this kind of work except being precise and systematic.
Bookkeeping doesn’t require any type of analysis. However, a bookkeeper must be informed about the news in the financial field. Usually, the accountant oversees the work of the bookkeeper, but can also perform any task from the process, if necessary. While the bookkeeper doesn’t need to have formal education for this position, the accountant must have a BA degree in accounting or financial field.
The accountant’s responsibilities
After the bookkeeper gathers all the financial records, the accountant uses that information and information provided by a business owner to provide a financial model. The accounting process is far more subjective when compared to bookkeeping that mainly refers to the transactions. Accounting may include recording all the expenses that were not yet recorded by a bookkeeper.
In addition, the accountant is responsible for working on the financial statements of the company, analyzing the costs, taking care of the income tax returns and advising the business owner about the future financial decisions.
Accounting also includes working on reports that show the overall financial state of the company. The goal of the financial reports is to have a deeper understanding of the profitability and the entire cash flow in the company.
This gives the business owner of the bigger picture of the financial state of the company, the progress it is making and the possible risks that should be managed. Accountants are crucial for making strategic plans concerning the financial future and filing for taxes.
It can often happen that the bookkeeper and the accountant do the same tasks, but in general, this does not happen too often. When bookkeeping is performed in a timely manner, the accountant will have all the records provided by a bookkeeper and will be able to provide solid advice, analysis and all the necessary consultations concerning the financial future of the company. If you want to learn more about the differences between bookkeeping and accounting learn from the MYOB team. Visit MYOB for more information.
Some companies prefer to merge these two positions since the fine line that once existed, slowly gets erased. The bookkeeping software does that part of generating all the financial statements of a company. Before the software evolved this much, this was part of the accounting process. Technological improvements have made jobs of both the bookkeepers’ and the accountants’ jobs a lot easier.
Outsourcing the services
Companies usually choose to outsource these tasks especially when it comes to bookkeeping because their services are not needed constantly, except when the company handles great amounts of money.
Nowadays, the bookkeeper can be hired online which is a great advantage of the 21st century when opposed to hiring workers full time when in reality there is not enough work especially when the company is young. The startups cannot handle huge expenses at first, so outsourcing these services can be a great way to manage your finances.
On the other hand, there are also agencies that can handle your workloads and free your time for other tasks. When the work starts blooming, it can quickly become stressful and overwhelming. Business owners cannot and should not do it all.
You will soon see the importance of delegating everyday responsibilities so you can keep your mind focused on overlooking the way your company works and the things you enjoy. Overworking yourself won’t get you far and it is not a good way of running a company. Giving a workload to qualified individuals who are experienced, knowledgeable and responsible will give you peace of mind that your company is in good hands.
The important thing is to create a good relationship with both your bookkeeper and the accountant because it is essential to establish a relationship based on trust. The bookkeeper and the accountant are basically the backbones of your company since they manage the most important part responsible for keeping your company alive – the finances.
If you’re not familiar with the terminology used by your bookkeeper or the accountant, make sure you ask anything you want to know because the better you understand the whole process, the better cooperation it will be.