Without proper accounting and bookkeeping, a business owner runs the risk of not knowing where the business stands, where it has been, and where it is headed. While both bookkeeping and accounting are important, it’s sometimes hard to discern differences between the two. In fact, these terms are frequently used interchangeably, but as you’ll see, they are different.
What is Bookkeeping?
Bookkeeping for some business owners means throwing all their receipts into a box, but good bookkeeping is much more than that. While it does involve keeping paperwork or digital documentation, bookkeeping also involves recording these transactions.
The process of tracking transactions for your business can occur on paper, in a spreadsheet, or within an accounting system or app. And no matter your method, keeping an accurate record of transactions is critical. In fact, good bookkeeping practices lead to better accounting decisions and analyses as you’ll see below.
What is Accounting?
Accounting is taking the next step of reviewing and analyzing the data entered during the bookkeeping process.
Do you know who is your biggest customer, which sales team is the most profitable, or which departments are not earning much profit? The process of analyzing this information is considered accounting. The decisions you make about growing your business will need to be based, at least somewhat, on past performance. The way you know past performance is by performing some accounting analyses on the transactions your business has experienced.
How Do Business Owners Handle These Tasks?
Business owners typically fall into 1 of 3 categories when it comes to bookkeeping and accounting:
1) I do all the bookkeeping and accounting myself.
2) Either someone on my team or I do bookkeeping, and then someone outside the company helps with the accounting.
3) I pay someone outside my company to perform both bookkeeping and accounting tasks.
There is no one-size-fits-all approach here. And as more user-friendly apps and programs are made available, the process of doing these tasks is easier for business owners.
Morgan & Associates Do Bookkeeping and Accounting
Remember, though, many of us do not perform our own home or car maintenance. We don’t have the time and/or expertise. The same is true for many business owners when considering bookkeeping and accounting. It’s more time and cost-effective to have an outside expert handle these tasks.
If you find yourself needing help with bookkeeping, accounting, or both, we at Morgan & Associates can help. We have the experience to do so!