September 20, 2017
Small business owners and entrepreneurs tend to be experts in their field or passionate about their product or service. Keeping the company financial records is not why they get out of bed in the morning. The concepts of monthly cash flow, budgeting, reconciliation, and accounting can seem daunting. Often, business owners do not understand the difference between accounting and bookkeeping or if they even need these services. So, let’s shine some light on these two essential tasks for any successful small business.
Bookkeeping - The recording of day-to-day financial transactions.
A bookkeeper's concern is daily transactions, which include purchases, receipts, sales and payments. Recording these items is usually done through a ledger or journal. Many small businesses use software such as Excel or QuickBooks to log entries, debits and credits. This work ends in a trial balance, which means the final total of debits and credits match. Bookkeepers keep meticulous records and implement processes and procedures which ensure that all information is aligned with regulations.
Accounting - The interpreting, classifying, analyzing, reporting and summarizing of a business’s financial data.
Accountants receive the data from the bookkeeper and turn that into meaningful information. An accountant uses that data to generate reports, analyze the account, perform audits and prepare financial records, like quarterly reports, tax returns, income statements and balance sheets. This information can help a business owner fully appreciate tracking of past finances and can project forward or budget for a future time period. An accountant's professional analysis of the financial information can provide a business owner a foundation for forecasts, business trends, opportunity for growth and when to restrict spending to manage cash flow.
When to hire a financial professional
Companies live and die by their cash flow and accounting practices. Regardless of the size of your company, it is critical for ongoing success to ensure the financial accuracy of daily transactions and use that data to make decisions for the future of your business. If you feel your company is outgrowing a "do-it-yourself" approach to finances, you should consider hiring a full-service CPA firm that can help you track and analyze your financial records.
By Allyson Cook
Photo by Andrew Robles on Unsplash.com
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