Approximately 62% of small businesses have in-house accounting help. Others opt for outsourced accounting teams. If you are considering hiring financial help, you’ll most likely be faced with the decision between accounting and bookkeeping.
Both are helpful but offer very different services. Let’s take a look at the difference between bookkeeping and accounting so you can make the best decision for your business.
What Is Bookkeeping?
Bookkeeping focuses on the administrative and transactional side of your business’s finances. It is mainly concerned with recording transactions, categorizing them, and reconciling these transactions each month. These transactions go in the general ledger.
In addition, bookkeeping for businesses usually includes processing payroll, sending invoices, and recording received payments.
Bookkeepers may also create monthly and year-end financial statements. This would include tax documents. A bookkeeper then sends these statements and documents to the accountant.
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What Is Accounting?
Accounting is a higher-level and subjective focus. An accountant reviews a business’s financial statements and analyzes them. They analyze the cost of operations and assess the health of the business. An accountant also makes financial forecasts for the business.
Small business accounting can help a business owner make more informed financial decisions. In addition, accounting services can include performing audits, filing tax returns, and doing tax planning. They can also offer accounting tips that can make the overall process easier.
Which One Do You Need?
Bookkeeping and accounting services are both valuable to a small business. Bookkeeping can help keep your day-to-day transactions organized. Meanwhile, accounting can help you plan higher-level moves.
Many small businesses choose to use both bookkeeping and accounting services since they are both valuable. You might be able to find an accountant who offers bookkeeping services as well. Or sometimes a bookkeeper will work under an accountant.
How to Choose Bookkeeping and Accounting Services
One of the first aspects you need to consider is if the accounting or bookkeeping team you are considering offers the services you need. Start by choosing between accounting or bookkeeping services.
From there, look at the specific services offered. If you need help with payroll or tax assistance, you’ll need to make sure the firm has experience in this area.
Some bookkeepers and accountants operate a one-person operation. Others operate as part of a team. Both offer advantages and it will come down to your preference. A team like Finvisor can give you a lot of support and keep all of your financial services with one team.
It’s also important to make sure your bookkeeper or accountant has the appropriate credentials. Bookkeepers generally don’t need to have formal education. However, they should be detail-oriented and knowledgeable about financial topics.
Accountants do usually need to have a bachelor’s degree in a related field. They also might have additional professional credentials. You should look for an accountant with a CPA title.
Know the Difference Between Bookkeeping and Accounting
Both bookkeeping and accounting are valuable services for small businesses. But it’s important to know the difference between bookkeeping and accounting so you can get the correct help for your business.
If you found this article helpful, make sure to check out our other articles about running a business.