Small businesses are challenged to control costs, while at the same time enhancing the use, reporting, and analysis of financial data. They often turn to bookkeepers for tasks and demands that are better suited to the education and experience of accountants. While bookkeeping and accounting are closely related and dependent upon each other, the differences between the two are important for small businesses to understand in order to create efficiencies and increase the value of the accounting department.
Bookkeeping is an indispensable sub-category of accounting that often includes the process of gathering, organizing, and processing the financial information of an entity. Bookkeepers are invaluable and necessary for facilitating the day-to-day operations of a business and, in some companies, preparing financial statements, tax returns, and internal reports to managers. A basic tenet of accounting is that financial information should be complete, accurate, and timely. Because the foundation for this starts at the transactional level the value of a competent, organized bookkeeper should not be underestimated.
Accountants are often tasked with turning rudimentary bookkeeping systems into means of allowing business owners to make long term strategic adjustments that can be vital in assuring success. A strong system of internal controls should be developed to protect businesses from fraud or avoidable weaknesses and accounting irregularities. Additionally, an experienced accountant will provide analysis and interpretation of financial data for business owners to add value, contribute toward the company’s success, and give modern small business the ability or be nimble and to know the effects of different financial decisions.
The combination of the two roles is the melding of the functions of measuring profit, a critical task accountants perform, that is often dependent on the accuracy of the information recorded by the bookkeeper. Accounting often goes a step further than bookkeeping by measuring the financial effects of economic activity. Furthermore, accounting includes the function of financial reporting of performance measures to those that need the information: business managers, investors, and many others who depend on financial reports for reliable information about the condition of the entity.
Bookkeeping is necessary for a company to keep basic financial records accurately, completely and timely. Accounting takes that basic function and adds meaning to it through financial reporting and analysis. Both roles are vital to the success of any business, but often in small businesses the accounting function is overlooked or neglected because of lack of awareness or short-sighted cost savings. TGG Accounting provides services ranging from bookkeeping through CFO-level accounting and financial management to small business in a cost-effective manner, based on the specific needs of each business.Written by: Brian O’Connor TGG Accounting