Did you know that nearly 4.5 million people started small businesses in the last year?
The COVID pandemic has been a time full of personal and professional pivots. Many people have taken the opportunity to build something of their own.
If you’re just starting out in business, chances are you’re wearing a lot of hats. You’re a business owner, CEO, finance person, and inventory and sales manager all at once.
When doing so many things, understanding the difference between bookkeeping and accounting is vital for you to keep accurate records for your business.
But what exactly is the difference between bookkeeping for business and small business accounting?
Do you need your accounting services to be separate from your bookkeeping services? Or can one person successfully handle the two?
Keep reading to learn everything you need to know about the difference between bookkeeping and accounting for your small business.
What Is Bookkeeping?
Bookkeeping is all about tracking the day-to-day financial transactions of your business.
This includes tracking products sold or services provided to customers. It also includes tracking payments that go out of your business. This includes incoming products, utilities, and any other resource that your company needs.
The most important aspect of bookkeeping is accuracy. Your bookkeeper needs to be able to track every detail of the money flowing in and out of your business.
What Is Accounting?
Accounting uses all the information recorded from the bookkeeping process to look at the long-term financial health of your business.
As an accountant, you’ll analyze the raw numbers, prepare quarterly and annual reports, and reconcile any discrepancies. You may also use this data to decide what action to take for the business to preserve its wealth and assets.
The most important piece of accounting is analyzing your numbers and making accurate financial predictions for the future based on those numbers.
Why Does the Difference Between Bookkeeping and Accounting Matter?
As you can see, although both bookkeeping and accounting are related to the finances of your business, they both are very different jobs.
Bookkeeping doesn’t need any specialized knowledge, just an eye for detail. Accounting requires in-depth knowledge of accounting practices and principles.
Knowing the difference between the two jobs will help you know what you have the skill set to do on your own. It will also help you realize what you need to hire someone else to do instead.
Check out this site to discover more on how a professional accountant can help you analyze your books.
Get Out There and Organize Your Records
Now you know the main difference between bookkeeping and accounting. Keep this in mind when organizing the finances for your small business. Do this, and you’ll have the most organized financial records in no time!
Looking for more information on running a small business? Check out the other articles in the Business section of our site.