It is a common misunderstanding among business owners that the functions of a bookkeeper and an accountant are one and the same. While the two entities perform financial tasks for businesses, there are a few specific things that make their roles different.
Bookkeepers and accountants provide financial aid for businesses to help them manage their cash flow, which is an important factor when making business decisions. Both financial roles are undoubtedly essential business functions.
So, what makes a bookkeeper and an accountant different?
Accountants: What Do They Do?
The accounting process involves recording, interpreting, classifying, analyzing, reporting and summarizing financial data. Accountants are in charge of this entire accounting process. They can work hand in hand with bookkeepers to ensure a quick and seamless accounting process. In fact, the bookkeeper’s job is making sure the accounts are valid and up-to-date when the accountant needs them. This lets an accountant use their knowledge to make business recommendations and successfully complete tax returns at year-end.
What Do Bookkeepers Do?
Bookkeeping involves the documenting of financial transactions that take place within an organization. Bookkeepers focus on logging all financial transactions for businesses. This includes keeping a clear and accurate record of the cash flow within the business, that is, all spending as well as incoming payments.
The services bookkeepers offer can vary. Some can process payroll, produce invoices, chase payments, and perform other HR functions for small businesses. This can also include assisting businesses with the processing of paychecks and tax payments to employees
Why Is A Bookkeeper Important?
A bookkeeper can keep an eye on all your business accounts and track all your day-to-day sales and purchases. This helps to ensure that you don’t run out of day-to-day money, which can include offering advice on whether the business needs more available cash to operate. Essentially, with the aid of efficient modern tools, a good bookkeeper records your cash flow ensuring every transaction is accounted for. This can save you the time of having to do daily data entry when you do a business transaction.
Bookkeepers typically make payments on behalf of small businesses. This can include anything from payment of supplier invoices, petty cash and expenses. Managing the accounts receivable ledger is also likely to be done by a bookkeeper. Many also prepare invoices and send them to your clients to ensure early and on-time payments from clients. For late payments, they can also follow up so that your records can always remain accurate and current.
Bookkeepers can prepare some of your business’ significant financial statements, including a profit and loss statement, balance sheet and cash flow statements. These financial reports reveal business operating expenses, the balancing of assets and liabilities as well as the cash flowing in and out of the business.
With a constant eye on your business accounts, bookkeepers can identify and flag any kind of inconsistency between your business’ bank accounts and your records. This is especially important as spotting any inconsistency in your books early-on makes resolving the problem less stressful in the end. Many business owners can attest to this, unfortunately. In terms of businesses with inventory, bookkeepers can also produce inventory reports by counting stock items. This procedure is commonly carried out at the end of a business’ financial year-end and logged in profit and loss statements.
Having a good bookkeeper is even more beneficial when it comes to your taxes. Any discrepancy in your books can result in receiving that dreaded letter from the HMRC in your mailbox. Competent and experienced bookkeepers are equipped with the knowledge of tax laws and requirements that businesses are required to follow. And, they can provide businesses with the right guidance and functions for complying with them. This also includes preparing you for the strict deadlines of tax season, to avoid additional fees or fines. They do this while making sure your records are accurate and up-to-date.
Some bookkeepers may also maintain accurate foreign currency accounts, utilizing current exchange rates.
Do I Need a Bookkeeper For My Small Business?
Bookkeeping can be quite straightforward if you know what you’re doing. On the other hand, however, it is also time-consuming if you’re not very experienced.
If you’re a growing business and you want to spend more time focusing on what you do best, you’ll need a reliable bookkeeper. You can choose to outsource a professional bookkeeper or add one to your staff, depending on your budget and needs.
How Do I Know When To Hire A Bookkeeper?
If you have no idea where to start or don’t have the time to keep your books in order and up-to-date, it’s definitely time to get a bookkeeper on-board.
Schedule your free non-obligatory consultation with a virtual bookkeeper. Bookkeeping Confidential will keep your books intact!