Why the Difference Between Bookkeeping vs. Accounting Matters
Within business, we use words interchangeably—even if we shouldn’t. Bookkeeping and accounting sound similar and while they have some overlap, they have different functions and purposes. Using one when you need the other, or reasoning you don’t need to use one at all, could cause significant accounting problems in your business.
In the following, we’ll discuss the difference between bookkeeping vs. accounting, why it matters for your business, and how working with Powered by Centri can help with your financial needs.
What Is Bookkeeping?
Bookkeeping refers to the process of recording financial transactions systematically. This includes tasks such as recording daily transactions, maintaining ledgers, and reconciling bank statements.
Bookkeeping is typically focused on the accurate and timely recording of financial data. This data is then used by accountants to create financial statements.
What Does a Bookkeeper Do?
A bookkeeper’s primary tasks are:
Recording Financial Transactions
Bookkeepers record all transactions made by your business, whether this is customer sales or business expenses. They will also keep track of any money owed to the business.
Posting Debits & Credits
Keeping track of the debits and credits to show what accounts are affected by a transaction and if it was a negative or positive transaction. This is especially helpful if you’re using double-entry accounting.
Invoicing helps keep track of what money is owed to your business and what money your business owes.
A bookkeeper helps ensure that payroll is kept up to date and that your staff gets paid correctly and on time.
Maintaining & Balancing Ledgers & Accounts
They make sure that at the end of the day, your books are balanced and everything adds up correctly.
How Is A Bookkeeper Beneficial To Your Business?
One of the biggest parts of being a business owner is keeping up with your finances. Bookkeepers can help you track and organize your financial records and reports, and do so while adhering to best practices.
If you later decide to hire an accountant, your bookkeeper will already have compiled detailed records of your business to reference, potentially saving you money in accountant fees.
Bookkeepers typically charge lower fees for their services than accountants. The specific amount varies based on the amount of filing and documentation you need, plus how many hours you’ll want them to work.
Another benefit of using a bookkeeper is they aren’t usually as invested in your business as an accountant is. Their primary focus is on your books and that is it. They don’t normally do any analysis or assessments to help your future. Bookkeepers are only responsible for recording financial transactions.
What Is Accounting?
Accounting involves a more comprehensive analysis and interpretation of financial data to support business decision-making. Accountants use this data to assess the financial health of a business.
What Does an Accountant Do?
An accountant can do all of the tasks a bookkeeper does plus some additional duties:
Manage the Bookkeeping Process
Accountants can catch and correct any clerical errors made and use these records to forecast a business’s health.
Generating Financial Statements
Accountants adjust the trial balance and generate the income statement, balance sheet, and cash flow statement.
Performing Financial Audits
Accountants perform internal audits to analyze and verify a business’s financial records and statements.
Preparing Tax Returns
Accountants produce the financial reports required to generate tax returns.
Helping Businesses Understand Their Finances
Accountants can help you understand where your money is going and how to interpret the financial data provided to help you make sound decisions.
How is an Accountant Beneficial to Your Business?
If you decide to hire an accountant for your business, there are a few specific benefits you get with your choice.
An accountant can use financial statements to help you plan for your future. They can analyze trends and see what would be a good area of your business to invest in (i.e. personnel, equipment, or building expansion). You receive a more rounded picture of your business than just plain figures.
Since accountants handle more aspects of your business, there is more responsibility assigned to that role.
To become an accountant, they need a four-year degree from an accredited university. Plus there are other certifications they can get, like CPA (Certified Public Accountant) or CFA (Charter Financial Analyst). These accounting credentials show the hours that someone spent on their education to get them to this level and can handle those additional tasks.
While you might pay more for an accountant, you get more services. Plus there is more accountability for your numbers.
Which One Is Better?
Now that we’ve gone over the difference between bookkeeping vs. accounting, you ask yourself, “Which is better?”
That depends on what type of business you have and what your financial goals are. If you just need some basic accounting work done, then a bookkeeper’s services may suffice.
If you want more analytical work done with your reports and someone who is more of a partner or outside perspective, then an accountant is the better choice.
Both jobs perform essential tasks needed to run a successful business—you just need to look at your budget and what would best serve you.
How Powered by Centri Works with You
At Powered by Centri, we don’t believe in a hands-off approach. Our goal is to become an extension of your team, helping you and your business succeed.
Our experts can operate as a bookkeeper or an accountant. We can do a range of work from basic bookkeeping tasks to acting as a controller, depending on what you need from us.
One of our jobs is to advise you on the best options available for you and your company. For example, you might be trying to decide if you want to use integrated accounting software. We can explore all your options and help you choose which one you should use. We also help with installing that software and giving you guidance on how to use it.
You have access to our experts, who can guide you through the accounting process and answer all your questions. We can also help with technical issues, strategic advisory, and transactional support.
Your personal point of contact will learn about your business and your specific needs. We take the time to learn all this and listen to your vision so we can give you the best advice possible. We don‘t succeed unless your business thrives.