When it comes to business finances, bookkeeping and accounting are at the forefront. Depending upon business size, financial roles are either combined or separated. Bookkeeping is a small but crucial function of the accounting cycle. On the flip side, accounting involves analysis, forecasting, budgeting, and planning. Bookkeeping and accounting are different, but they both tell a financial story, help entrepreneurs make decisions, and measure performance.
What is Bookkeeping?
Bookkeeping is the recordkeeping of business financial transactions. Once transactions have taken place (purchases, deposits), the bookkeeper records bookkeeping entries. Duties include reviewing invoices/bills, bill and bill payments (accounts payables), and recording sales and payments (accounts receivables). Also, bookkeeping tasks are more clerical (data entry, filing documents). Other related titles are accounting clerk and junior accountant.
Can a Bookkeeper Prepare Financial Statements?
In small businesses, nine times out of ten, bookkeepers take on some or all accounting tasks. For nonprofit organizations, usually a board treasurer or finance committee that oversees financial reports. With a lack of separation of duties, the company is at a greater risk of having weak internal controls.
In addition, most accounting software generates financial reports. If software lacks flexibility or specific features, professionals might use excel spreadsheets to prepare custom financial reports for users.
What is Accounting?
Bookkeeping and accounting tasks are part of a cycle. Accounting tasks come after bookkeeping is complete. In addition, there are more specialized duties such as payroll, auditing, taxation, cost accounting, forensic accounting, and controller, to name a few. The accounting role is primarily analytical. In addition to preparing financial statements and perform budgeting and forecasting duties, they communicate with senior management, finance committees, and the board of directors. Certified Public Accountant designations are usually the case with most accounting professionals.
When Outsourcing Bookkeeping or Accounting
Prices are either hourly or packaged based. Bookkeeper rates typically range between $16-$22 per hour. Accountants can charge anywhere from $35 up to a couple of hundred dollars per hour—other factors in the cost are your business needs and scope of work.
First, when seeking someone to handle financial tasks for your business, look beyond education and designations. Second, don’t be afraid to check for references. Third, of course, there’s yelp, but a quick Google search will provide you with a variety of results.
Check Duns and Bradstreet’s website and see if the company is registered with them or not. In a nutshell, it is a credit report for businesses. To see if the Bookkeeping/CPA firm is in good standing, look up the name on the State Department website to see if they file paperwork on time.
Lastly, talk to fellow clients to see if the firm provides a range of services. Make a list of specific questions to ask. Then review your notes and decide based on the information gathered from both the firm and others.
When choosing to do business with a company, research is essential. Even though the internet is resourceful, research should go beyond that.
Bookkeeping and accounting serve different purposes, but the two must work together to provide accurate financial information.
Question: Did you learn something new from today’s blog post? If so, please share in the comments below.