Differences Between Bookkeeping and Accounting

‘Bookkeeping’ and ‘accounting’ are two terms that are used a lot in the financial world. While they are often used in tandem or interchangeably, they’re actually two distinct roles for financial management. It’s important to understand the difference between the two if you want to keep your finances in order.

What Is Bookkeeping? The Foundation Of Day-To-Day Financial Record Keeping

Bookkeepers are professionals who record daily financial transactions, ensuring that your operations are accurately recorded. They maintain precise and up-to-date financial records so that you have documentation of your daily operations. 

A few duties that your bookkeeper may handle are:

• Recording Financial Transactions. Keeping records of your financial transactions is a must, especially if you plan on deducting business expenses when you file your taxes. 
• Posting Debits And Credits. Every financial transaction is recorded as a debit in one account and a credit in another, following a double-entry method.
• Creating Invoices. Your bookkeeper will create invoices, accurately document sales and ensure timely billing for products or services. 
• Managing Payroll. Your hardworking team deserves to be paid fully and on time. Your bookkeeper will stay on top of your staff members’ pay so that everyone receives compensation for their efforts. 
• Maintaining And Balancing Ledgers. Your bookkeeper will stay on top of ledgers, accounts and subsidiaries for accurate financial reporting. 

As you can see, bookkeepers play a very vital role in good financial management. They provide the data necessary for financial analysis, and their prompt recording ensures that your records are accurate and reliable. 

This accuracy is important for complying with tax regulations and having a proper view of your overall financial health. With this data, you can keep your operations running smoothly and within budget while setting realistic goals for the future and making changes when needed. 

What Is Accounting? Using Accurate Data To Shape Your Financial Decisions

While bookkeepers focus on day-to-day details, accountants step back and look at the whole picture. They take your financial information and interpret, analyse and summarise it for you. Accounting builds upon the work done by bookkeepers to create actionable insights, give suggestions, identify weaknesses and strengths and forecast your cash flow. 

A few duties that your accountant may take care of are:

• Verifying And Analysing Data. Your accountant can look at your financial records to draw conclusions about your profits, financial stability and so on. They can make projections and identify issues that you can use to formulate innovative financial strategies for the future of your company. 
• Generating Reports. Your accountant can create tax returns, income statements and balance sheets. Creating these reports yourself can be difficult, especially if you want to guarantee accuracy, so having a professional handle them for you can give you peace of mind while promoting precise records. 
• Performing Audits. An audit is a proper review of a company’s financial records. Audits are meant to make sure that the financial information stored is represented accurately and fairly.
• Identifying Opportunities. When your accountant analyses your finances as a whole, they can point out growth opportunities that you could take to improve your business. They will consider your overall goals to make suggestions that align with your unique objectives. 
• Adjusting Your Financial Strategy. Businesses change over time, and so should strategies. What worked for you when you first began your company may not work for you today. Your accountant will look at your business plan with you to make changes for the better. Even if your business is doing fine, it’s essential to routinely look over your finances and your business plan with your accountant and make adjustments if needed. 

While bookkeepers play the crucial role of financial recording, accountants are more suited for taking that information and helping business owners see the bigger picture of their financial situation. They can help you make the right choices at the right times. Strategic planning is absolutely essential if you want to promote success for your company, and your accountant can act as your reliable financial partner. 

When Should You Work With A Financial Professional?

When is it time to work with a bookkeeper or accountant?

• Your Finances Are Too Complex. If you’re feeling overwhelmed, then reaching out to a professional is a fantastic first step. 
• You Want To Make Better Choices. Do you feel that you could be managing your finances better? A specialist can guide you through the process. 
• You Are Spending Too Much Time On Finances. Time is money, and spending too much time in any one part of your business can be damaging. An expert can take some of the burden off of your shoulders. 

Setting Yourself Up For Success With Professional Financial Services

We welcome you to speak to our expert accountants at Business Like NZ Ltd if you’re interested in making better choices, creating strong business strategies and having a better grasp on your finances.

You can call us on 09 262 0726 or use our contact page to reach us.

Let’s discover the best ways to manage your finances together.