Did you know that accounting and bookkeeping are not the same service? They are similar but different. Both services are essential for legal and financial reasons, but most importantly they help you be aware of your financial processes and business health. Ever wondered which service suits best to your business needs and goals? More often than not, these two services are used interchangeably as they are similar because some bookkeeping tasks are completed by accountants and vice versa. It is important that we define these two services.
Learn more on the difference between bookkeeping and accounting.
What is Bookkeeping?
Bookkeeping is a predominantly administrative task. It is the recording, tracking and organising of all financial transactions of your business. It’s about managing your finances and invoicing. This process of recording your transactions involves getting hold of receipts, invoices or purchase orders and processing this information on a document in an orderly manner. Think of it as a long receipt for anything you purchase.
Using this data, bookkeepers are able to provide information on your financial and business processes. It is a much simpler process than accounting, as it only involves the administrative task of data entry.
In short, bookkeeping involves:
- Recording of transactions and finances
- Monitoring cashflow
- Bank reconciliations – a comparison of your expenses and profit in your books in relation to what is actually in your bank records.
- Invoicing – sending an invoice to your client after they purchase your service
- Paying your bills
- Data presentation and reporting
It is understandable that bookkeeping is a simple service but essential to any business owner, to monitor their finances.
What is Accounting?
Accounting on the other hand is more strategic. An accountant is similar to a financial advisor as they use the financial recordings and transactions of your business, analyse it and come up with suggestions and advice on how to proceed.
An accountant looks at all your spendings and your profit, they look at the data the bookkeepers gather and analyse and determine your financial performance. From there, they also help you make the best decisions for your company.
In short, accounting involves:
- gathering the data from the bookkeepers and compiling a monthly report that will explain in detail your business’s overall financial performance and guide you to make better decisions.
- payroll – is the responsibility of paying employees, keeping a list of all employees, their personal details, their working hours and managing their payments.
- bank reconciliation
- tax preparation – calculating and filing for income tax returns as well as ensuring you are tax compliant.
- preparing End-Of-Year (E.O.Y) reports which look at all the financial processes throughout the financial year of your business.
All accounting services involve the analysis and evaluation of your performance as well as strategising with you and advising on best decisions for a stable future.
What is the difference between these two services? Bookkeeping?
The difference is that bookkeeping is a process that looks in the past while accounting is a process that looks forward and into the future. Bookkeeping is associated with tracking and recording every transaction of yours. Transactions and payments happened in the past; this service focuses on what happened then and putting it down on paper. It looks to the past only and on your transactions.
On the other hand, accounting looks to the future by evaluating your past. It is a process that looks to strategise for a positive outcome in the future. It aims to improve your financial future as well decisions based on your finances.
How we take care of your business finances
Alpha Pro Partners can take care of your accounts for you.
Using a cloud-based accounting software, Xero, we offer you professional services in accounting and bookkeeping to support your business growth and help you focus on the tasks that matter.
Our qualified accountants and bookkeepers will help you stay on top of your finances. Get in touch.