Every business, especially smaller ones, lives and dies by its cash flow and accountability. Therefore, properly assessing the financial viability of your business can be accomplished only after studying recorded transactions and business processes. It’s fairly simple to record and understand sales, expenses and other financial data, but understanding the financial needs of your business is not always easy. Which jobs require a bookkeeper? Which require an accountant? Is there a difference between the two? Let’s explore this topic further.
The bookkeepers’ sphere of responsibility is keeping track of the daily financial transactions of your business. This includes purchases, receipts, sales, and payments. Software such as Quickbooks and Peachtree have the replaced the traditional ledger to keep track of entries, debits, and credits. It is the bookkeeper’s job culminates with a trial balance, meaning that the total number of debits and credits match.
The accountant then takes this information and conducts some analysis, generates reports and perform audits. The work that accountants produce can be used to make forecasts, business trends, identify possible growth opportunities and make cash flow decisions. The accountant, therefore, looks at the big picture, they take data and turn it into information.
Having said this, both accountants and bookkeepers work depends on each other. The accountants need the raw data that the bookkeepers have to turn it into information and the bookkeepers need accountants to classify each data entry. For example, if your business has transactions with coupons or rebates, the accountants will determine whether or not to record the net amount of the sale or the gross sale amount. Then the bookkeepers will record this data.
Since the accountants are financial information gatekeepers, it is fair to say that bookkeeping is the record-keeping side of accounting. All records must be made in a timely, complete, accurate and reliable matter. This is especially important when it comes to financial statements and tax returns. Having inaccurate information in your financial statements can wreak havoc in your business.
Every business needs both bookkeepers and accountants to keep track of financial transactions and then turn this data into information. Having qualified experts who can perform both of these tasks can be a driving force for your business.