In this blog we will be explaining differences of bookkeeping vs accounting in detail and how they each contribute to the financial health of your business, that are often used interchangeably, but they are different functions that serve different purposes in your business.

Bookkeeping VS Accounting 

What is Bookkeeping?

Bookkeeping is the process of recording daily financial transactions such as sales, purchases, receipts, and payments in a systematic and organized manner. It involves maintaining accurate financial records, such as ledgers, journals, and financial statements.

What is Accounting?

Accounting is the process of summarizing, analyzing, and reporting financial information to stakeholders, such as investors, creditors, and regulators. Accounting involves interpreting financial data and making strategic decisions based on that data. It includes services such as financial reporting, budgeting, forecasting, and tax planning.

Bookkeeper vs Accountant: Job Responsibilities and Qualifications

Bookkeepers are responsible for recording and organizing financial transactions in a company's accounting system. They typically have a certificate or diploma in bookkeeping and can perform tasks such as recording transactions, reconciling bank statements, and preparing financial reports. Here are the eight basic and major responsibilities of bookkeepers: 

Responsibilities of a Bookkeeper:

• Recording financial transactions accurately

Bookkeepers are responsible for recording all financial transactions accurately, including purchases, sales, receipts, and payments. They ensure that all financial records are up-to-date and reflect the organization's financial position accurately.

• Managing accounts payable and accounts receivable

Bookkeepers manage accounts payable and accounts receivable, which involves tracking and managing payments to suppliers and from customers. They ensure that payments are processed on time and that customers pay their bills on time.

• Reconciling bank statements

Bookkeepers reconcile bank statements to ensure that all financial transactions are accurately recorded and that the organization's bank account balance is correct. They identify and resolve any discrepancies between the organization's records and bank statements.

• Generating financial reports

Bookkeepers use bookkeeping software to generate financial reports, including income statements and balance sheets, to provide insights into the organization's financial performance. 

• Maintaining accurate financial records

Bookkeepers maintain accurate financial records, including ledgers and journals, to ensure that all financial transactions are properly recorded. They organize and maintain financial records in accounting and bookkeeping software, making them easily accessible for audits or other purposes.

• Managing payroll and tracking inventory

Bookkeepers manage payroll, ensuring that employees are paid accurately and on time. They also track inventory to ensure that the organization has the necessary supplies and materials to operate efficiently.

• Managing budgets and cash flow

Bookkeepers manage budgets and cash flow, which involves tracking expenses and revenue and ensuring that the organization has enough cash on hand to meet its financial obligations. They help the organization make informed decisions about how to allocate resources and manage its finances.

• Ensuring compliance with tax laws and regulations

Bookkeepers ensure that the organization complies with all tax laws and regulations. They prepare tax and file VAT returns using a VAT software, and advise the organization on tax planning strategies. They also maintain records and documentation to support tax filings and audits.

Qualifications Required For Bookkeepers

Bookkeepers in the UK can get professional certifications by completing challenging tests. If your bookkeeper will be handling the majority of your accounts, including VAT and payroll, you should look for one that has one of the following recognised certifications:

• AAT (Association of Accounting Technicians)
• ICB (Institute of Certified Bookkeepers)

Accountants, on the other hand, have a higher level of education and are responsible for analyzing financial data and making strategic recommendations to management. They typically have a degree in accounting, finance, or a related field, and can perform tasks such as preparing financial statements, providing tax planning advice, and performing audits.

Here are the eight basic and major responsibilities of accountants: 

Responsibilities of an Accountant:

• Preparing and analyzing financial statements

Accountants are responsible for preparing and analyzing financial statements, such as balance sheets, income statements, and cash flow statements. They ensure that the statements accurately reflect the financial position of the organization and provide insights into its financial performance.

• Managing financial transactions

Accountants manage financial transactions, including accounts payable and accounts receivable. They ensure that all financial transactions are accurately recorded, tracked, and processed in a timely manner.

• Ensuring compliance with tax laws and regulations

Accountants are responsible for ensuring that the organization complies with all tax laws and regulations. They prepare and file tax returns, and advise the organization on tax planning strategies.

• Managing budgets and forecasts

Accountants manage budgets and forecasts, which involve predicting future financial performance and allocating resources accordingly. They help the organization make informed decisions about how to allocate resources and achieve its financial goals.

• Providing financial advice to the organization 

Accountants provide financial advice to the organization, including guidance on financial planning, risk management, and investment strategies. They help the organization make informed decisions that align with its financial goals.

• Managing payroll and overseeing audits

Accountants manage payroll, ensuring that employees are paid accurately and on time. They also oversee audits, ensuring that all financial data is accurate and complete, and that the organization is in compliance with all applicable laws and regulations.

• Managing internal controls
• Accountants are responsible for managing internal controls, which involve policies and procedures designed to safeguard the organization's assets and ensure the accuracy of its financial data.

• Ensuring the accuracy and completeness of financial data

Accountants ensure the accuracy and completeness of financial data, including financial statements, budgets, and forecasts. They review financial data to identify errors and discrepancies, and take corrective action as needed to ensure that the data is accurate and complete.

Qualifications Required For Accountants

There are recognised accounting qualifications to look out for:

• ACA or FCA: member or fellow of the Institute of Chartered Accountants in England & Wales (ICAEW). Only members of this institute are entitled to use the title "Chartered Accountant." A Scottish and Irish Institute is also available.
• CIMA: members of the Chartered Institute of Management Accountants typically train in industry and can call themselves Chartered Management Accountants.
• ACCA: members of the Association of Chartered Certified Accountants typically train in industry.
• Part qualified or P/Q:  Accountancy examinations are quite difficult, and hardly everyone passes them. As a result, you can locate a partially trained professional who has extensive experience and knowledge but cannot charge as much.

Bookkeeping for Your Business

Bookkeeping is a critical function in your business, regardless of its size. It helps you track your financial transactions and monitor your cash flow, enabling you to make informed decisions about your business. Accurate bookkeeping also helps you comply with legal and tax requirements and enables you to file your tax returns accurately and on time.

• How to Choose the Right Bookkeeper for Your Business

You have two options when it comes to bookkeeping: hiring an in-house bookkeeper or outsourcing to a bookkeeping service provider. In-house bookkeeping may be suitable for larger businesses that have a high volume of financial transactions. Outsourcing bookkeeping is often more cost-effective for small and medium-sized businesses that do not have the resources to hire a full-time bookkeeper.

When choosing a bookkeeper, look for someone who has experience in your industry and understands the unique challenges you face. They should be knowledgeable about accounting software and have strong attention to detail. You should also ensure that they are reliable, trustworthy, and can maintain confidentiality.

Accounting for Your Business

Accounting is a crucial function in your business, as it helps you make informed decisions based on financial data. It provides you with a clear understanding of your business's financial health, enabling you to make strategic decisions about investments, expansion, and cost control.

Types of Accounting Services: Financial, Managerial, and Tax

There are three main types of accounting services: financial, managerial, and tax. Financial accounting involves preparing financial statements and reports for external stakeholders, such as investors and creditors. Managerial accounting provides internal stakeholders, such as management, with financial information for decision-making. Tax accounting involves preparing tax returns and providing tax planning advice.

When to Hire an Accountant for Your Business

If your business is growing or you're experiencing complex financial issues, it may be time to hire an accountant. An accountant can help you with financial forecasting, tax planning, and strategic decision-making. They can also provide guidance on compliance with accounting standards and tax regulations, as well as assist with audits.

Bookkeeping vs Accounting: Which One Does Your Business Need?

• Key Differences Between Bookkeeping and Accounting

The key difference between bookkeeping and accounting is that bookkeeping focuses on recording and organizing financial transactions, while accounting focuses on interpreting financial data and making strategic decisions based on that data. Bookkeeping is a necessary precursor to accounting, as accounting relies on accurate financial records to provide insight into your business's financial health.

• How Bookkeeping and Accounting Work Together

Bookkeeping and accounting work together to provide a complete picture of your business's financial health. Accurate bookkeeping ensures that your financial records are up-to-date and organized, which provides the foundation for accounting services such as financial reporting, tax planning, and strategic decision-making.

• Bookkeeping and Accounting Software: Choosing the Right Tools for Your Business

Choosing the right bookkeeping software and accounting software can streamline your financial processes and improve accuracy. Moneypex is user-friendly software, that integrates with your other business tools and provides the functionality you need, such as invoicing, expense tracking, and financial reporting.

Benefits of Hiring Professional Bookkeepers and Accountants

• Hiring a professional bookkeeper can save you time and money by ensuring that your financial records are accurate and up-to-date. They can also provide insights into your business's financial health, enabling you to make informed decisions about your business.

• Hiring a professional accountant can provide your business with the expertise you need to navigate complex financial issues. They can provide strategic guidance on financial forecasting, tax planning, and compliance with accounting standards and tax regulations.

Tips for Successful Collaboration with Accountants and Bookkeepers 

Collaboration between your bookkeeper and accountant is essential for ensuring that your financial records are accurate and that you receive the insights you need to make informed decisions about your business. Encourage regular communication between your bookkeeper and accountant, and ensure that they have access to the same financial data to provide a complete picture of your business's financial health.

Final Words

Bookkeeping and accounting are essential functions in your business that work together to provide a complete picture of your financial health. Hiring professional bookkeepers and accountants can provide your business with the expertise you need to navigate complex financial issues and make informed decisions about your business. Not only this but if you choose the right accounting software and bookkeeping software like Moneypex for your business, you can ensure that your financial processes are streamlined, accurate, and compliant with legal and tax requirements.