While bookkeeping and accounting might sound like the same job for a non-specialist, there are stark technical differences between the two. This article explores all the similarities and differences between bookkeeping and accounting. It will show how each plays a vital role in the growth of a business.
Bookkeeping Vs. Accounting – A Bird’s Eye View
From a bird’s eye view, bookkeeping is restricted to data recording of day-to-day finances, while accounting deals with the organization’s in-depth financial analysis, projections, and financial planning. In organizations of a larger scale, accountants may also perform an internal financial audit of the company and prepare and manage the annual, biannual, or quarterly financial reports to evaluate the company’s finances.
In addition to the responsibilities divided between accountants and bookkeepers, when it comes to qualification, an accountant holds proper degrees and certifications, while the bookkeepers may or may not have any degrees and diplomas.
Evolving Industry Trends
Given the rapid digitalization of industries worldwide, the trends in bookkeeping have also evolved. Bookkeeping is no longer tedious, with countless software and tools available to record the data daily. Particularly, if you have a progressive business and know what you are doing effectively, only a little assistance is required in bookkeeping.
While the software also offers analysis and projections, an accountant’s job has been made easier through these tools, allowing them to tweak projections and evaluate based on specific industrial parameters. An accountant will also focus on providing intelligent purchase ideas, making well-informed decisions, and securing better control over the cash flow to make the most out of investments.
Over the years, the line between accounting and bookkeeping has diminished due to the evolving software tools. It has minimized human input. AI-based software has also conveniently started making business projections, further reducing the load on an accountant.
Stark Differences Between Accounting & Bookkeeping
Both accounting and bookkeeping would seem precisely like a novice since both involve financial dealings.
Academic Qualification: Bookkeeping is more of a data entry job and requires little to no input of ideas and analysis. A simple accounting course and a basic understanding of the software can make you eligible for a job as a bookkeeper. However, to qualify for the accountant position, it is necessary to have a higher education and an in-depth understanding of financial systems, audits, tax laws, and all the essential tools used in accounting.
Role differences: A bookkeeper’s job mainly consists of maintaining the payroll system, recording payments, generating invoices, preparing finance statement drafts, making journal entries, and coordinating with the client’s finance department to receive payments. On the other hand, an accountant is responsible for financial analysis, strategy, taxation, planning, organizing and planning budgets, reviewing business performance, and preparing business forecasts.
How Can You Decide Which One You Need?
Many small businesses and sometimes even big companies are unsure about their requirements. It becomes difficult to compare an accountant’s job with a bookkeeper’s. Although these two have significant variations, it’s impossible to differentiate at all in some cases. Main differences depend on factors involving the industry to which the business is related, such as how many employees you have in your organization, the magnitude of the checklists and business tallies, and the requirement to maintain fixed assets. Once a business has figured out its actual condition, it will be comparatively easy to decide whether it needs the services of a bookkeeper or an accountant. Generally, bookkeepers are perfect in terms of maintaining expenses. On the other hand, an accountant would analyze the overview of the performance of the business.
Sometimes, organizations learn to manage their finances without the assistance of any bookkeeper or accountant. However, most businesses prefer to hire a professional so the administration can focus on other tasks. In conclusion, it is safe to say that spending on accounting and bookkeeping is necessary for your business’s steady growth and success.
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