Keeping a tab on finances is essential for the day-to-day running of any business. Bookkeeping and accounting are both related professions that often get mixed up by people. This article will delve into the specific differences between bookkeeping and accounting while also advising on which service to utilize for your business.
What Is Bookkeeping?
Many business owners tend to have questions that revolve around ‘what is bookkeeping?’. Bookkeeping is the process of recording transactions and finances. Any business needs to do regardless of their size. Having a clear record of your books helps to see your business’s health and assists with the day-to-day running of it. Additionally, it makes it easier to do your taxes. These records must be done daily and ensure that the transactions are comprehensive. Accounts and financial documents can then be prepared by utilizing the data that is created through bookkeeping. Every single transaction that a business undergoes must be recorded, whether it is a purchase or a sale. This is what basic bookkeeping entails.
Examples of transactions can include;
– Payments to Suppliers
– Client/Customer Payment
– Asset Depreciation
There are three main types of bookkeeping;
– Single Entry Bookkeeping
– Double Entry Bookkeeping
– Virtual Bookkeeping
Traditional Bookkeeping vs. Modern Bookkeeping
Traditional bookkeeping has been around for centuries, and many of the practices are widely used today. The traditional methods involved ledgers, charts of accounts, and a double-entry system. The two accounts were for credit and debit. The sums could be cross-referenced to check for any errors. However, this method of keeping track was rather tedious. Even basic bookkeeping required a lot of time and effort.
Thankfully, due to technological advances, bookkeeping has evolved to be far more efficient. The rise of computers allowed books to be stored on computers, but this led to issues over storage space. Nowadays, bookkeeping is done on the cloud, where files can be safely stored. There is unlimited storage without the need for buggy updates or the fear of systems crashing. Additionally, there are smartphone applications that allow for the management of books on the go. Overall, bookkeeping has evolved as a direct result of technological advances, but its role has remained essential at this time.
What Is the Difference Between a Bookkeeper and an Accountant?
The terms bookkeeper and accountant are sometimes used interchangeably, and many think that the roles are the same. However, are some specific differences that you should understand between a bookkeeper and an accountant. The roles can overlap in certain ways, but they have different responsibilities and provide separate services to a business.
An accountant manages the overall finances of a business and can be responsible for financial planning and advice. Many types of accountants can fulfill specific roles. At the same time, a bookkeeper has a more specific and specialized role. Bookkeepers focus solely on recording financial activity. It is their job to manage the tasks and practices involved with this. Below, you can see some of the main services that can be performed by an accountant.
Services Performed by an Accountant
– Tax assessment and advice
– Preparation of financial statements
– Analyzing business expenditure
– Resolution of accounting disparities
– Completion of Payroll related tasks
– Management of financial database
As you can see, accountants can perform a variety of roles, but the majority tend to specialize in a few. This is in contrast to a bookkeeper who specifically focused on recording transactions. Both are just as vital as each other for any business.
Which Should You Get First, an Accountant or a Bookkeeper?
Not every business is the same, but there are some general guidelines that they should all follow. Factors such as the size of the business will influence your ideal hiring scenario. Every business needs bookkeeping, and if this role cannot be done in-house, then you should definitely hire a professional. They can keep things in order and record transactions for your business. In general, they tend to be cheaper than an accountant too.
But, you will also need a professional accountant if your business wants to grow. An accountant can work with a bookkeeper to analyze transactions and prepare financial returns. They can help your business file taxes and advise your business on financial forecasting. All of this is done through data that is made available through bookkeeping.
So the answer is fairly simple, you need both in order to run a successful business.
Types of Online Bookkeeping Services
In the past, bookkeeping would require you to hire an individual to work at your premises. However, technological advancements mean that bookkeeping can be done remotely and more efficiently. There are various online bookkeeping services available to suit businesses of all sizes and cater to all specific requirements. There are three main types of online bookkeeping services;
– Solo Freelancer
There are experienced freelancers available to work on a part-time basis. You can hire them to work online, and they will be able to record transactions remotely. Usually, they will work for a variety of businesses.
– Bookkeeping Software
For a monthly fee, you can utilize bookkeeping software that makes it easy to record transactions. This automated software provides easy to use features, and support is available. But, you will not have a dedicated bookkeeper to handle your accounts.
– Virtual Bookkeeping
You can also get access to a dedicated bookkeeper who can operate virtual bookkeeping and sort your transactions. This can be done virtually without the need to look for freelancers.
How Much Do Bookkeeping Services Cost?
The cost of booking services can vary depending on the task that is required. The average price can range from $500 to $2500 a month for small to medium businesses depending on the complexity of the tasks. However, automated software is usually $20-100 a month, but you do not get access to an individual bookkeeper. Hiring a virtual bookkeeper can cost around $35-$60 per hour, depending on the services required. If you need online bookkeeping, then you should research your options carefully. Online bookkeeping services are usually far more competitively priced in comparison to the wages of an in-house role or hiring a professional bookkeeper part-time. Technology allows the services of bookkeeping to be provided remotely.
It should now be clear to you that bookkeeping and accounting are related disciplines, but they service different purposes. Overall, the main difference between bookkeeping and accounting is that bookkeeping can be thought of as one specific aspect of accounting. At the same time, accounting itself is a broader discipline. Hence the roles of an account and bookkeeper are different. You should now be able to understand these differences so that you can make the correct hiring decision for your business and pick out the most effective bookkeeping/accounting services.