What is bookkeeping accounting, and should your small business take advantage of this strategy to keep your financial information on track?
What is bookkeeping accounting, and why do you need to know? If you own a small business, keeping track of all things financial is critical. Losing your grip on your financial situation is a quick way out of business. That’s why bookkeeping and accounting are so vital to your success, profitability, and growth. If those two terms are a little vague, never fear. We are here to fill you in on everything you need to know about bookkeeping and accounting. Take a look.
What Is Bookkeeping?
Bookkeeping is the process of recording all of the financial transactions of a business. Some of the primary tasks include:
- Entering financial transactions into an accounting software program
- Accounts receivable – receiving and recording all payments, including indicating who paid you and for what and labeling all transactions appropriately
- Accounts payable – make payments to vendors or suppliers and record all transactions, including who you paid, how much, and for what and labeling all payments appropriately
- Assigning debits and credits to the right account
- Preparing financial statements, including profit and loss, balance sheet, cash flow statement, and statement of gains and losses
- Collect sales tax and remit to the IRS
- Monthly account reconciliation
- Process payroll
- Maintain annual budget
Why Is Bookkeeping So Important?
A good bookkeeper is responsible for recording all of a company’s financial transactions. Without proper bookkeeping, your business would lose track of all of the information that is vital to your success as well as to your accurate and timely tax filings. And on top of that, all of the accurate data can help you make better decisions when it comes to operations costs, staffing, budgeting, investing, and other financial decisions.
Accuracy is critical when it comes to your financial information. Hiring an experienced bookkeeper can ensure the books are done right the first time. Not only does it count when it comes to potential investors as well as the government, but it gives you an accurate and reliable picture by which you can measure the performance of your company. You can use it to set your revenue goals and as a guide for long-term objectives for your sales team, your products and services, your marketing, and your growth.
What Is the Difference Between Bookkeeping and Accounting?
Both bookkeepers and accountants work with the financial information and data of your business. And both are important to have on board when you start your new business or when your business is growing, and you can’t keep up with the books any longer. Instead of running yourself ragged, consider bringing a bookkeeper and an accountant on board. Why both? There is a difference in their responsibilities and the scope of their work, and any small business on the path to profitability needs both.
A bookkeeper is the keeper of the financial information. Their role is to record all of the transactions done with and by a business. Accuracy is their number one priority, and making sure nothing is missing is vital.
An accountant is responsible for the same financial information; however, instead of recording it, they interpret and analyze it. Their job is to summarize and communicate the information to you as a business owner.
How Do Bookkeeping and Accounting Work Together?
Bookkeepers and accountants offer different services to your company, but they complement each other and often go hand-in-hand. Keeping track of transactions and recording all financial data is vital not only to the company but to your accountant. Your accountant relies on that information to do their job.
Without the right numbers in place and the right accounts recorded and labeled, it would be difficult and time-consuming to do things like preparing your taxes, giving guidance on investments, advising on purchases and inventory, having oversight on spending and overhead, and helping with creating a manageable budget. And your bookkeeper relies on the expertise of your accountant to analyze your financial information and strategize on your growth. The two positions create accountability and security, giving checks and balances when it comes to your data.
Why You Should Outsource Your Bookkeeping and Accounting
Many business owners think it’s better to manage the books themselves, especially when just starting out. The problem with that is it takes you away from running your business and eats up your valuable time. It also means you don’t have an expert doing the job. Instead of taking a chance with your books, recordkeeping, reporting, tax filing, and strategizing, talk to a team of professionals that can manage not only your bookkeeping but your accounting as well. Don’t overlook the importance of having experienced, qualified experts on your side.
Now that you know what bookkeeping and accounting are and what they can do for you call Accounting Partners, Inc. at 678-990-0924 for a free consultation to learn how we can help your business.