Accounting vs Bookkeeping – What is the Difference and Why Does it Matter?
It is very common for non-accountants to think that accounting and bookkeeping are the same thing. Both play a vital role in the financial cycle but fulfil quite different purposes. As a business owner you need to understand how these functions operate to ensure your business is getting the right financial data and advice that is critical for your future growth and success. So, let's take a closer look:
What is a Bookkeeper?
Bookkeeping is the process of recording the daily financial transactions of the business in a consistent way – generally the basic cash in, cash out in order to gain a simple understanding of financial performance.
Bookkeeping is the first stage of the accounting process and lays the foundations for the work completed by an accountant.
Unlike accountants, bookkeepers do not need any formal qualifications. Frequently the person keeping the books for a small business is the business owner themselves, although as their business grows, they often look to their accountant to provide this service.
What is an Accountant?
The accountant takes the raw information recorded by the bookkeeper and makes sense of that information. Accountants are trained and qualified professionals, skilled in analysing, interpreting and presenting data in different ways. This includes preparing tax returns and financial reports such as profit and loss statements and balance sheets – all essential to managing your business.
Accountants create reports that bring together key financial indicators to enable a better understanding of profitability and cash flow. Their focus is on providing business advice to help ensure your business performance is on track for the future.
There are however differences between regular accountants and Chartered Accountants. Chartered Accountants are further qualified to be members of the industry body which has strict professional and ethical standards. This includes the requirement for ongoing training and upskilling. So, working with a Chartered Accountant gives you the extra confidence your financial affairs are being well looked after!
Accountants and Bookkeepers Working in Harmony
Accountants can be bookkeepers but bookkeepers are rarely accountants. However, as the transactional information provided by the bookkeeper provides the foundation for the accounting process, it is important the two work in harmony.
One way many small businesses create this professional and financial harmony is to outsource both functions to a Chartered Accountant. Using the latest cloud accounting systems such as MYOB and Xero, Paul Martin Chartered Accountant Limited is able to exploit the synergies of a single data source to deliver real-time views of your company's performance. This enables more effective decision making, saves you time and gives you peace of mind your business is in good hands.
Contact us today to talk about how we can help you transform your business financial management.