Accounting & Bookkeeping are two essential parts of any entrepreneurs business.
Without proper knowledge on these subjects your business will have a hard time keeping track when growing and maintaining. That is why most successful businesses choose to hire professional services of these kinds.
But why are they so important? We will answer this further into the blog, first we need to understand what they are.
What is Accounting?
Accounting is basically how your business organizes, records and generally understands its financial information.
When we speak of accounting you can think of it as a huge machine that you put raw financial information into for example records of all your business transactions, taxes and projections. This machine then spits out an easy-to-understand story about the financial state of your business.
Accounting will let you know how much profit your business is making if there is any. Also what areas of your business may be lacking or not keeping up to speed with the rest.
Some accounting activities include:
- Preparation of financial statements
- Costs of operation Analisis
- Performance metrics Calculation
- Completion of tax returns
- Guiding the business owner in making informed financial decisions
What is Bookkeeping?
On the other hand, bookkeeping could be categorized as a subfield of accounting, which deals with the processing and interpretation of all types of financial information. Bookkeeping is the recording of a business’s daily transactions and does not deal with auditing, taxes, or other types of accounting.
In effect, Bookkeepers create reports that accountants use to later analyze and create strategies to overcome certain financial issues.
Some activities they accomplish:
- Updating General Ledger with debits and credits.
- Balancing and maintaining subsidiary ledgers and historical accounts
- Creating invoices
- Paying suppliers
- Preparing & Calculating payroll checks
Why do we need both?
As previously mentioned above, these two areas go hand in hand, bookkeepers create the reports needed for accountants to properly create strategies. This means that you will have to have experts in both areas to properly maintain your business afloat.
Having only one expert is like having a basketball with no hoop, there is no point to the game.
Some professional services include both experts, this is great simply because these areas rely heavily on good communication and problem-solving skills. If both areas are from the same team, this will make communication crisp and clear therefore resulting in a better end result.