How is bookkeeping different to accounting?
Bookkeeping is an essential service yet how does it differ from accounting? These two services are usually compared, but they are complementary:
- Bookkeepers do the daily work and bring the accounts up to a high standard of detail and accuracy. They can also advise you on issues that might affect your business in the near future, such as cash flow problems or late invoice payment.
- Accountants will check at the accounts that have been created, usually on a quarterly basis. They will make any minor adjustments required. They will use the data in the accounts to file tax returns and other official reports. Accountants will also provide high level business advisory services.
In order for your business to run smoothly, ideally you need both of them. You’d hire a bookkeeper to look after the daily work. Also, you’d hire an accountant to handle official reporting and high level business advice.
A detailed view of your business
Bookkeepers and accountants work with the same financial data from your business. They can share that information using cloud-based accounting software like xero. That means they can access your financials securely online, from remotely. It will let them share the reports about the financial status of your business.
Therefore, both of them can give you advice about where your business is right now and even where it’s heading according to your vision.
Your bookkeeper will be the usual accounting contact for your business. They’ll be best placed to answer enquiries about where the money is coming from, and where it’s going.
When should you hire a bookkeeper?
The sooner the better. If your business haven’t already have one, you should do hire soon! Ideally you’d get one soon after starting your business.
Otherwise, you could end up with several months’ worth of receipts and invoices to be processed and you don’t like that to happen. It will take time and may be hard to do, because you’ll have forgotten which client to bill for a particular expense.
For example, you may ask yourself, “What was this plane ticket for? Who did I visit on 13 June?” A bookkeeper would know which client you visited and why. They would then account for the travel expense in the right way.
Finding the right person
Whoever you hire needs to be trusted with the day to day information of your business finances. So, you should be extra careful when you hire a bookkeeper.
There are many bookkeeping businesses, so you’ll have plenty of choice. You could contact one directly, or you could ask if your business partners or clients have any referral or recommendations.
You may ask your current accountant too. It’s best if you can find a bookkeper who uses the same accounting software as your accountant. That way they can share accounts data easily.
Ideally the accounting software should be cloud-based, which means it’s accessed online. Then all of you will be able to share access to the financial data for your business. You can do it anywhere and securely.
When you have already short listed your potential bookkeepers, you may do this:
- check their past work record
- contact their references and talk to them
- ask your accountant to have a meeting with your proposed bookkeeper.
It is a huge step on trusting the financial details of your business with anyone. Hence, you should do your research carefully before you hire one.
Bookkeepers offer an important role in business . They help you save time by handling all the day-to-day financial work for you and allow you to focus on the running your business instead. The real-time information they collect can help them offer you new insight into your business.
That’s important when you’re trying to differentiate your business from your competitors. Real-time information is also essential if you want to make sound business decisions.
As we’ve covered in this article, a bookkeeper is highly valuable to a small business and can provide more services than just financial recording and compliance. Usually, a bookkeeper will specialise in a particular industry, so it pays to ask them about this so that they can add even more value. Make sure that you get the best out of your business by hiring a bookkeeper to help you along your business journey.
Ready to make that decision? Get connected with an experienced bookkeeper. Contact us now.