Bookkeeping and accounting: what's the difference?
When most people talk about bookkeeping and accounting, they often treat them as one and the same. While they’re closely related, there are some important differences.
Understanding what's involved in bookkeeping and accounting is particularly important for small businesses - it helps you break down which tasks can be handled within the company and which require help from a professional, plus it makes it easier to identify what you should be doing on a regular basis.
Bookkeepers vs. accountants
Bookkeeping is the systematic recording of financial transactions, while a bookkeeper is someone who keeps a complete, accurate record of a company’s financial information. A bookkeeper’s day-to-day responsibilities might involve invoicing, inputting data, processing payroll, recording expenses, and reconciling bank accounts.
Accountancy measures the financial health of a business by verifying, interpreting, and reporting financial data. An accountant’s main responsibility is to prepare and analyse financial reports; they then use this analysis for financial forecasting, identifying opportunities for growth, suggesting ways to improve cash flow, or planning future expenses.
Bookkeeping is therefore the first step of accounting - it provides accurate and up-to-date information for accountants to analyse, and an accountant’s insights or advice is always based on the data provided by a bookkeeper.
Because the work of a bookkeeper and an accountant is so closely related, the roles might merge in a smaller organisation, with an accountant taking on many bookkeeping responsibilities. On the other hand, larger companies might have several employees who work in specific areas of bookkeeping or accounting.
Accounting and bookkeeping for small businesses
If you’re new to running a small business, it can be tempting to ask an accountant or bookkeeper to manage every aspect of your company’s finances, but this is a luxury most small businesses can’t afford - and don’t actually need!
Many day-to-day, simple bookkeeping tasks can be handled in-house, such as creating and sending invoices; tracking expenses; and sending reminders, credit notes, or quotes. By taking on these responsibilities, you’ll be in control of your business finances and can put your accountant’s expertise to better use.
However, it’s important to find a balance between the work you are comfortable and capable of doing and the work your accountant should do daily. While some tasks can be picked up quickly, some aspects of accounting and bookkeeping require the knowledge, skills, and experience of a professional - so don’t be afraid to ask for help. You should always consult an accountant for advice about growing your business or improving cash flow.
Bookkeeping and accounting with online invoicing software
Accounting and bookkeeping might seem like a daunting task, but with invoicing software like Debitoor, it's easy to manage your own finances. Features such as recurring invoicing, automatic bank reconciliation, and financial reporting help you take on the roles of bookkeeper and accountant.
Debitoor invoicing software is built for freelancers, sole traders, and small business owners; it is designed to be intuitive so that, even without a background in accounting, you can record expenses, manage taxes, and track payments. By offering accountant access, Debitoor makes it easy to collaborate with your accountant online - exchange data, save time, and speed up communication by working together in the cloud.
Plus, Debitoor is designed to grow with your business, meaning that you can upgrade your plan and access more features as and when needed.