We tend to consider bookkeeping and accounting as the same thing if we are unfamiliar with the intricacies of both functions. But as a business owner, you need to realize that bookkeeping and accounting are two entirely different functions. To decide which professional is suitable for your business, you must first understand the primary difference between an accountant and a bookkeeper.
What is a Bookkeeper?
A bookkeeper is responsible for keeping the books of the business by handling the day-to-day paperwork. This includes recording income and expenses, and reconciling bank accounts.
Some bookkeepers can also help the business with managing the payroll functions and filing VAT returns. Often the owner will handle minimal transactions during the early stages of the business, but as the business grows and becomes more complex, hiring a bookkeeper becomes more important.
Bookkeepers can help you to run your business better by doing the following:
- Recording financial transactions of a business and categorize the same to create accurate financial records.
- Managing the business’s cash flow and quickly identifying any cash flow issues may create trouble for your business.
- Issuing invoices to customers, collecting receivable invoices, and ensuring no unpaid invoices can affect the business’s cash flow.
- Recording supplier bills and ensuring suppliers are paid on time.
- Conducting regular reconciliation of the bank accounts of the business to ensure accuracy.
- Maintaining an ordered filing system and ensuring that the bookkeeping practices of the business comply with the laws and regulations of the government.
- In some cases, bookkeepers can also manage the business’s payroll functions and keep track of the business inventory.
Modern bookkeepers use computer software such as Quickbooks, or Sage Accounting.
When looking for a certified local bookkeeper, it is preferable to hire someone who has qualified from one of the following globally recognized institutes:
In the U.S.:
- National Association of Certified Public Bookkeepers’ (NACPB)
- The American Institute of Professional Bookkeepers (AIPB)
- Quickbooks Certification
In the UK:
- Association of Tax Technicians (ATT)
- International Association of Bookkeepers (IAB)
- Institute of Certified Bookkeepers (ICB)
What is an Accountant?
An accountant is responsible for looking at the big picture by verifying and analyzing the data recorded by the bookkeeper. An accountant can fulfill the responsibilities of a bookkeeper, but a bookkeeper cannot carry out the functions of an accountant. An accountant plays a crucial role in the financial well-being of a business.
Accountants can perform any function, from simple bookkeeping to providing strategic advice to the business owner.
Some of the main tasks that accountants perform for a business are:-
- Preparing a company’s financial statements to ascertain the business’s financial position and determine the profit or loss for the period.
- Maintaining the books of accounts allows the accountants to assist the business owner in future planning and decision-making for the business’s profitability.
- Assisting with cash flow management, budgeting, and business forecasting
- Studying and auditing the financial reports of the business meticulously. They ensure the compliance of the business records with the relevant laws and regulations.
- Sometimes accountants also perform internal auditing for some organizations at regular intervals of time to improve the overall efficiency and management of the business.
- Preparing and filing tax returns timely to ensure that the business does not have to pay any penalty. They also act as tax consultants by suggesting changes that the business owners can make in the business’s financial system to reduce their tax burden.
- Offering strategic financial guidance to business owners by forecasting and analyzing future business trends.
- Preparing the business budget and supervising it at regular intervals of time to cut down on any unnecessary cost.
Accountants are responsible for managing the financial health of your business. That is why it is vital to hire an accountant who has relevant experience and qualifications from any of the following institutes:-
In the U.S.:
- Certified Public Accountant (CPA)
- Certified Financial Analyst (CFA®)
- Certified Management Accountant (CMA)
In the UK:
- Chartered Institute of Management Accountants (CIMA)
- Association of Chartered Certified Accountants (ACCA)
- Institute of Chartered Accountants in England and Wales (ICAEW)
- Institute of Financial Accountants (IFA)
When is the Right Time to Hire a Financial Professional?
Hiring a financial professional in the earliest stages of a business can build a robust financial foundation.
To determine which type of financial services your business needs, you should consider all the factors, including:
- The type and size of your business
- The complexity of your business operation
- Your business’s needs and requirements
- The scale of activities performed by your business
- Your business turnover
Based on these factors, you can decide whether you need a bookkeeper, an accountant, or both for your business. You can even choose whether you need full-time or outsourced financial services.
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