As a new business owner or someone who was already in the accounting business but now starting their own entrepreneurship or anyone else interested in doing their own auditing, there is some news for you: it was never as easy, as transparent, and as possible to do so as it is today.
Let’s see how a basic understanding of it can help boost your business and better perceive the numbers that build it.
Accounting vs Bookkeeping?
First, we need to set apart these two terms which, although very similar and connected, have different responsibilities and job descriptions.
Accounting is mainly focusing on the groundwork and completion of tax returns, offering general business and financial advice, and advising on legal entity structures. The accountant will also be able to give propositions to the business owner about planned investments or any expansions further to the market, and all that based on timely figures, their skill, and knowledge.
On the other hand, bookkeeping makes sure that accounts are credible and up to date. Besides organizing, reporting, and registrating financial transactions, bookkeeping has a lot bigger spectrum of duties than accounting:
- Implementing POS (point of sale) systems that oversee daily transactions (mostly in retail).
- Preparing invoices and sending them to clients.
- Making any payments for the business, like transitory invoices, expenses, or minor cash premiums.
- Keeping an eye on revenues and expenses and making sure the company doesn’t go without money.
- Appointing the right software and setting it up.
Basically, bookkeeping is a day-to-day endeavor and it requires some serious knowledge and skills as well. It would be safe to say it has an even more important role – as accounting wouldn’t be able to concentrate on strategic operations without proper and real numbers.
Without precise bookkeeping, your business is less likely to properly thrive on the market.
Systems and Softwares
Accounting software is already a welcomed necessity for bookkeeping and according to Xero Accounting, the benefits, features, and services we can expect from them are many.
Not only it allows you to work flexibly and keep track of your business with the mobile apps, but it gives you easier and just a click away insight on cash position, feeds from banks and financial institutions, authorizations, and role tracking within access control. The information security and data protection, sending and updating invoices and bills, and optimal tools and dashboard are some of the reasons why small businesses, accountants, and bookkeepers trust these systems with their business numbers.
With the rise of technology and possibilities of online accounting courses, the old ways of bookkeeping in means of “writing down” numerals, derivatives, calculations, and sums are starting to look like a survival from the past, but the time is always right to learn the basics of it.
Nevermind if you’re a fresh business owner and starting to do your own taxes or you already have an accountant do it for you, this part of the work cannot be bypassed. Well, good bookkeeping makes tax preparation much easier firstly, and then the accountant can do the reports about income and expense, profit, liabilities, and, lastly, tax return forms.
Therefore, do not be deceived – it is the bookkeeping that properly prepares data and it is known that failing to have numbers in order can cost us on our tax return, so why not rely on bookkeeping to prevent missing payments and provide better records?
Bookkeeping involves dealing with fine units and statistics and it can be truly overwhelming and it is one of the main reasons why people usually hire a bookkeeper. It is good for one more reason – having somebody else do the numbers and provide us with prevision, can affect the bigger picture, as for the strategy of our business.
Bookkeeping, with its expense tracking, budgeting, and accurate records, actually leads to better decision-making. It allows you to project future success, spreading to new markets, making new investments, and have the overall idea where your company is going based on how well it is performing and where it stands now, according to those tough digits.
For the business owner and growth for its business, reports on how healthy your business is, are crucial. Although the accountants usually prepare financial reports, bookkeepers can do that as well with what is called a management report.
Most importantly, this report shows your expenses as well as incomes because the reported data clearly displays from where and what sources money is coming into your accounts and how and where it is being spent. This is very important because this report allows us to notice some trends especially if the report compares previous data which allows us to criticize performance and predict it in the next quarter or over the course of next year.
It was already mentioned that bookkeeping can substitute for accounting when it comes to business reporting, tax preparing, and how it can actually affect decision-making. One more form of cutting cost is totally replacing an accountant with a bookkeeper because if you only need control over daily transactions and monthly payroll – you could save a lot of money (and time!) by having a bookkeeper do this work instead, especially if you have smaller business or are starting one.
Not to mention that even if you do your own accounting, hiring a professional bookkeeper will, in fact, pay off with getting the right figures when sending company reports to HMRC and, in the longer run, having an extra pair of eyes to monitor the cash flow and making sure there is enough of it.
However you turn it, bookkeeping is a must, especially if you have a smaller business and a trusty associate (if not you, maybe even somebody from the family or your friends?) to keep watch over money income and outcome, growth predictions, and future strategies. Let’s be clear – if you don’t have a clear picture of your company’s finances, you can’t make proper business decisions and without proper bookkeeping, you cannot have a proper business.