Management of the Finances in a Business is crucial. It is the most important part of running a business. Effective financial management helps companies make better and more informed financial decisions, and achieve their goals. It also leads to better financial results increasing the trust of investors and stakeholders as well as boosting the reputation of the company.
To manage finances effectively, businesses need proper accounting and bookkeeping services.
Bookkeeping provides all the important finance-related data and trained accounting professionals analyze that data to interpret the financial health of the business or company.
Bookkeeping: The Foundation
Bookkeeping is basically the collection of the financial data of a Business on a daily basis. Bookkeeping means recording financial transactions everyday and providing that data to the Accounting team for review and analysis.
Main Purpose of Bookkeeping to keep records of the finances such as daily transactions, Payroll Services, Expenses, Incomes, Payments etc. All these are updated and saved on a regular basis so that they can be used anytime.
Bookkeepers use specific Bookkeeping softwares such as QuickBooks to keep record of all the financial transactions of the business. They ensure that all the data regarding the financial expenses, payments etc is accurate and updated. They keep the data in an organized from and provide it to the Accountants so that they can interpret it and make further decisions keeping in mind the financial situation of the business.
Accounting: Analytical Insights
All the financial statements recorded by the bookkeepers are handed over to Accountants. Accounting services include analyzing all the financial data including statements, transactions, records and see what financial situation the company is in.
An Accountant will analyze the financial health of a business and provide valuable insights and ideas to improve where the company or business lacks. They will aid in comparing the business to its competitors to see what can be changed or improved. Keeping the business update with the market needs and trends is also analyzed by accountants.
Main Differences between Bookkeeping and Accounting
Nature of work:
Bookkeeping is more administrative and record focused. All the important transactions are looked over and recorded by bookkeepers. The financial statements are organized through bookkeeping and kept updated regularly to be used by Accountants.
Accounting is more of an analytical and strategic work. The data provided by bookkeepers is used for analytical insights to help the businesses make better decisions and achieve their goals as well as change strategies to adapt to the trends.
Skills:
Bookkeepers use bookkeeping softwares and they are keen in their work but they don’t have specializations or specific degrees to work as a bookkeeper. They need to have work experience and expertise.
Accountants are specialized in their fields and they are certified for their accounting roles. Certain businesses require Certified Public Accountants (CPA) to work for them as they are professionals in their field.
Software:
Bookkeepers use online bookkeeping softwares that are available on the web to do their work as they are easier to use and easily available.
Accountants usually have a specific Accounting Software specifically designed for the business they are working for. Or they might use Accounting Software provided by accounting firms catering to the business’ accounting needs.
Conclusion
Bookkeeping records, updates and provides important financial information. It also helps in managing all the financial transitions and keeping tax records. Specialized Accountants make use of the financial data and analyze it to make strategic decisions for the business. Hence, bookkeeping and accounting go hand in hand for the financial management of a business or a company.