In running a successful business, one must have a good grasp of its financial standpoint.
Accountants, bookkeepers, and auditors have always been an essential part of every business.
Your accounting team is here to set you up for success as they ensure your numbers add up in running payroll to increase profitability.
Oftentimes, people are confused between bookkeeping and accounting. So, how are they different from each other? Continue reading to know the answer.
In the Philippines alone, accounting is one of the most popular career paths and there are several investments towards growing a pool of experts in this field.
The global accounting services market is valued at $868 billion by 2022 and is one of the most in-demand business process services to date.
Even more on jobs, bookkeepers and accountants hold over 1.4M positions in the US alone, making these ones of the most in-demand positions in companies nowadays.
As we go on, we'll answer what is the difference between bookkeeping and accounting and their benefits to your business.
There is a high demand for this because 72% of small businesses and self-employed professionals do their own bookkeeping and this can put them at risk of errors.
About 18% of them are interested in seeking professional help.
Around 2% rely on friends and family to do their bookkeeping. This presents a great demand for outsourced accounting professionals year after year.
Difference between accounting and bookkeeping
Is bookkeeping and accounting the same? There are subtle yet significant differences between the two that may be hard to notice.
Simply put, a bookkeeper records the day-to-day financial transactions of a business while accountants, in contrast, focus more on the big picture, including solutions on how to enhance the profitability of a business.
While accounting has been a straightforward task, the job itself has developed over the years and as a business owner, you need to have a perfect understanding of the two and how you can maximize its full potential for the benefit of your business.
Accounting vs. Bookkeeping
The two jobs may seem similar to one another as 79% of outsourced accounting firms offer both bookkeeping and accounting to their clients
Often, they also work side by side and both roles require almost the same set of skills and attributes. However, the differences exist and the distinctions are quite significant in terms of education requirements, skills required, and even job outlooks.
Bookkeepers and their roles in a business
Bookkeepers are tasked with the role of recording every financial data of the business, including journal entries and conducting bank reconciliations.
Having great attention to detail is important as a bookkeeper as any missed information, hidden mistakes in a budget or invoice can become a damaging issue to the business.
Often, bookkeepers are outsourced and work for different clients at the same time.
While a bookkeeper does not require any formal training, their job is just as important.
The information and data that the bookkeeper handles affect how the accountant will interpret the data and financial reports. Using this information, handle their expenses, tax issues, and other financial matters.
Bookkeepers usually take on different jobs involving the entry of financial data and transactions that a business occurs. Some of which include:
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Implementation and maintenance of the business’ accounting software
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Monitor bookkeeping policies and procedures.
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Assigning of different expense categories.
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Enter expenses and income into the software and track non-digital methods of payments, such as cash and checks.
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Handle banking activities of the business.
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Assist the accountant in preparations of financial statements, including the elimination of discrepancies and verifying recorded expenses.
Accountants and their roles in a business
The accountant’s role in every business is that they are the ones that would interpret the financial data provided.
However, it does not just stop at analyzing the numbers, as part of the job is the ability to possess sharp logic skills and problem-solving abilities.
Accountants draw from the information that the numbers present to drive significant and firm decisions for the company.
Accountants usually require certification to work either for a company or on their own with several projects.
It is one of the most in-demand positions in industries like insurance, health, small business, law, and even tax accounting firms.
Accountants may need certification to become a certified public accountant (CPA, which is a common goal by most accountants as this expands their income opportunities and even be able to service multiple clients at the same time.
Accountants play a vital role in your business success. They oversee important tasks that can help make or break your company’s success. Here are some of those that accountants usually cater to:
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Analyzing financial data including profits, projections, and expenses of the business
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Generating reports, performing internal audits, and preparing financial reports like tax returns, income statements, and balance sheets.
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Accountants also provide forecasts of business trends and opportunities for growth within and outside of the business.
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Helping business owners understand the impact of their financial and business decisions.
How to compare bookkeeping vs. accounting?
A comparison of bookkeeping and accounting showed that accountants look into the big picture of the business and its profitability through the data that their financials provide.
They have a higher skill set than a bookkeeper who is handling the actual recording of the company’s financial transactions.
Typically, a bookkeeper reports to an accountant.
A key difference between bookkeeping and accountancy is that while an accountant may also do the bookkeeping themselves, a bookkeeper would need additional credentials to pursue the roles of an accountant.
While the two roles can be easily defined, it is also important to understand the relationship between bookkeeping and accounting and the advantage of having these roles better synergized together so that your business can expand, grow its revenue and mitigate any risks.
These two roles can be similar and, more often than not, accountants and bookkeepers work side by side. These lines of work may require almost the same set of skills.
It is not an unusual move for a bookkeeper to gain more job experience, study, and the certifications to become a full-fledged accountant.
How can hiring accountants and bookkeepers benefit your business?
As your business grows, so does the amount of financial tracking that you would need to do to keep on track of vendors, customers, employees, and other essential parts of the business operations.
This can become more difficult to keep track on your own.
So many small businesses and even larger corporations rely on accounting services that provide the expertise that the business needs for its financial planning and tracking.
Accountants believe their profession will work best as it adapts to new technologies.
Therefore, accountants and bookkeepers in outsourced firms are up to date and enhance their expertise further because offshore companies easily adapt and invest in digital transformation.
This is highly beneficial for your business as it grows as new software can not only speed up the work but also give more information on how your business is doing and find new growth opportunities.
An expert offshore accounting firm like Offshore Business Processing can offer you the flexibility of having both for your accounting needs.
Offshore companies usually require their accountants and bookkeepers to have the proper training, screening tests, and certification to be deployed to their clients.
From a growth perspective, bookkeeping and accounting tasks for your small business may be too much to handle.
This is the perfect time to gain additional help and resources.
Whether you need only a bookkeeper or an accountant, the terms and scope of work may overlap however, it is important to understand the benefits and advantages of having both and having a reliable offshore partner that can provide the right accounting expertise that can drive more profitability and efficiency for your business.