In any business, understanding financial matters is significant. Most small business owners understand their expenses, including their rental, employees or vendors, and the interest on their loaned money. However, most people fail not to understand their revenue. As a result, they invest their profits into poor-performing products and services, leading to business failure. Eliminate some of those risks by understanding the difference between bookkeeping and accounting.
Difference by definition
In simple terms, bookkeeping is about recording data and transactions. For instance, if you have a £20 bill you earned after providing a product or service, your business has the power to spend it, invest it, or save it. Regardless of what happens next, these transactions have started the bookkeeping and accounting processes. A good bookkeeper can tell you all the transactions that led you to earn £20 and the subsequent transactions.
On the other hand, accounting summarizes all transactions into reports. Going back to the £20, a good accountant can look at your transactions, summarize them, and make some honest conclusions about how you spend your money.
Why do you need bookkeeping or accounting?
Are you deciding whether to hire a bookkeeper or an accountant in central London? Keep in mind that bookkeeping and accounting work together. You can’t produce financial reports without data; without a report, your data is pointless. With the insight from your accountant, you can make crucial business decisions that will help your business grow and develop.
A bookkeeper can help you with other tasks such as employee payroll, bill payment, invoicing, and reconciliation.
An accountant can help you with complex tasks such as tax preparation, loan applications, letter generation, and overall setup. T
hese are the tasks you won’t have to worry about as a small business owner, thus giving you more time and understanding of other more essential things in your business.
Who is cheaper to hire?
The main factors that affect the rates of bookkeepers and accountants are their level of skills and knowledge. A bookkeeper will generally require no extensive education or experience. They must only acquire the skill or cognitive ability to perform their tasks.
For this reason, independent bookkeepers charge lower fees than accountants. However, accountants generally require some level of education and experience. For example, they possess a bachelor’s degree or even pass a certification exam to prove their competence. Therefore, their rate is based on their level of expertise.
If you are in the process of deciding to hire a bookkeeper or an accountant, the key is to identify your weaknesses and needs. For example, a bookkeeper may be a good fit if you’re looking to save some time on some mundane tasks. However, if you need help understanding your business’s financial status on a deeper level, an accountant may be a better fit.
On the other hand, if you are starting and have no business, you probably do not need either. Regarding bookkeeping or accounting, there’s no one size fits all. It boils down to personal skill set, interest, and the current stage of your business.