This post is provided by Jamshaid Chaudhary.
Despite all the factors that need to be considered when running a business, one of the most important is ensuring that the financial aspects are kept in order. Although there are some that can deal with some of the financial tasks that need to be undertaken, in most instances, a helping hand will be needed.
When looking for solutions to deal with income and expenditure as well as the many other monetary-related tasks involved in running a business, many will search for a professional accountant or bookkeeper.
When searching for financial services there can be accounting and bookkeeping services available, with many assuming that they are the same, but this is not the case.
Bookkeeping: An Overview
Bookkeeping is the recording of financial transactions as well as the preparation of statements, which can include but are not limited to creating balance sheets and cash flow.
Those carrying out bookkeeping will maintain a ledger that records income and outgoings, allowing to business to maintain a regular cash flow and ensure money is set aside for liabilities.
Accountancy: An Overview
Although the concept of accountancy is like bookkeeping, there are some differences that set it apart.
One of the main roles of accounting is to allow business owners to make better business decisions. This is made possible thanks to a series of tasks including reviewing company accounts and analyzing the cost of operations.
This allows for a larger overview of business financial goals and is not limited to the cash flow currently in place, as several factors will be considered.
The Differences Between Bookkeeping and Accounting
There are many times when bookkeeping and accounting overlap, but there are many differences that set the two apart. The following is a breakdown of the main differences between the two. There can
The Main Aspects of Bookkeeping
- Foundation of accounting,
- Bookkeeping is one aspect of accounting.
- Bookkeeping provides input data for accounting.
- Bookkeeping summarizes data regarding transactions to date.
- Bookkeeping is clerical.
Accounting
- Uses the information obtained from bookkeeping to prepare reports
- Accounting often takes over when bookkeeping ends and offers broader scope regarding financials.
- Accounting requires knowledge of several practices.
- Accounting prepares statements based on the input data from accounting.
Which Service Should I Choose: Accounting or Bookkeeping?
As there are differences between the two, some may be confused as to which service suits them best. The fact of the matter is that the requirements can vary depending on the level of expertise required.
Small businesses just starting up may find that bookkeeping is perfect for keeping transactions in order. However, those with larger businesses will often want to keep the day-to-day financials in order, as well as completing year-end accounts may benefit more from accounting.
Bookkeeping vs Accounting: Which is More Expensive?
In most instances, bookkeepers will carry out less-involved tasks than an accountancy firm, so the services are often less expensive than an accounting firm. However, it shouldn’t be assumed that this is always the case.
In both instances, the fees paid can depend on the tasks that are carried out. For example, some businesses may undertake some of the basic bookkeeping and then transfer more complicated tasks to a professional bookkeeper who will pay less than those wanting a full bookkeeping service.
When deciding on whether a bookkeeping or accountancy service is best suited to your needs, you shouldn’t focus on the cost alone. Simply choosing the cheapest option often means receiving a limited service that still requires a lot of work from the business.
Although this may cost less initially, it can be more costly for the business, as time needs to be set aside to carry out these tasks, which could impact other areas of the business.
Those who have no experience with keeping records of transactions or financial planning should always employ the services of a professional, focusing on the tasks that can be carried out as opposed to the price.
What Options are Available Regarding Bookkeeping?
Like many other sectors, the accounting industry can offer a multitude of services in different guises. Some may offer conventional services over the phone and in person, whereas others take on the form of an app.
The benefit of an app-focused service is the cost can be less compared to other solutions, but there can be limitations when taking this route. Although there ate many apps that can make sense of simple transactions using artificial intelligence, nothing can replace the service a seasoned professional can offer.
So, although using a professional accountant or bookkeeper as opposed to an app can seem more expensive in the interim, it can be more cost-effective in the long term.
Using a professional also ensures that no there are no oversights regarding complicated issues. For example, there could be a refund issued into a business bank account that shouldn’t be subjected to VAT, but an automated app could assume this is the case, meaning the business could potentially overpay its liabilities.
Employing the services of seasoned professionals regarding bookkeeping and accounting ensures that plans can be made regarding the progress of the business, while also ensuring a positive cash flow is maintained.
About the author: Jamshaid Chaudhary
I began writing as a professional on my personal blog and then discovered my true calling, which is writing about technology, News and gadgets in general. I am a technical writer, author, and blogger since 2010. An industry watcher that stays on top of the latest features, extremely passionate about juicy tech news and everything related to gadgets.
