It’s not uncommon for the owners of small businesses to start out by managing the books themselves. It’s just one more set of tasks in a huge list of responsibilities they take on. But financial matters are not an area where you can afford to either make mistakes, or fall behind on work, so eventually, you’re going to reach a point where it’s time to bring in a professional. When that time comes, it can be difficult to make a decision as to whether you actually need accounting vs. bookkeeping.
In reality, it’s very possible that you need both, at different times, and for different purposes. However, there’s some confusion about just what the differences are between accounting and bookkeeping. This isn’t surprising, since there’s a certain amount of overlap between the two. Fortunately, when you hire a virtual accounting firm, you’ll have access to a full service financial team that includes both accountants and bookkeepers. But to be clear, let’s look at what’s included in each of these disciplines, so you know which type of financial professional you need for which tasks.
For starters, bookkeeping includes a number of tasks that need to be done on a regular basis, and which you’re probably already doing on your own. When the volume of business gets large enough that it’s taking too much of your time and pulling you away from my vital responsibilities, it’s time to get bring in a bookkeeper to take some of that load off of your already too busy schedule.
The responsibilities that fall under bookkeeping include daily routines like accounts receivable (invoicing and collections), accounts payable (bills and payments), and general ledger entries. A bookkeeper will also help you with reconciliation of your bank accounts, credit card accounts. They’ll take care of matters like payroll processing, including sales commission. Producing and reviewing balance sheets, financial statements and other reports are also part of bookkeeping. All of this will be done following what are called GAAP (Generally Accepted Accounting Principles).
Accounting, on the other hand, is a much broader range of financial work, of which you could say that bookkeeping is one smaller subset. Accountants themselves can be expected to have a higher level of degrees and certifications, and don’t generally get involved in daily bookkeeping routines. They usually supervise or coordinate the work done by bookkeepers. Your accountant will work with the data that bookkeepers produce and report, using that data for more advanced and complex functions. They’ll interpret and analyze the reports that the bookkeepers prepare, using their deeper understanding of accounting principles. They will also produce higher level reports that monitor the financial health of your business, and provide expert advice to help you make decisions involving your company’s financial health and tax planning.
If you’re having trouble deciding between accounting vs. bookkeeping, an excellent solution is to use the services of a virtual accounting firm. They’ll provide you with a full team of professionals who are able to handle all of your company’s financial tasks.