Cash flow management and accountability are important aspects of operations for any business. With accurate recordings of transactions coupled with proper assessment and processing, business owners can have a firm foundation from which they can make decisions and plan their business’ growth.
Recording and understanding the basic financial needs of any business such as sales, expenses, and payments is not that hard but understanding the accounting needs of a business is not that easy. To understand this better, it is essential to realise the difference between Bookkeeping and Accountancy. The basic difference between the two is that the bookkeepers record and maintain the everyday financial activities of the organisation that can be then verified and examined by the accountants. Simply put, bookkeeping is one aspect of accountancy whereas the latter deals with the bigger picture.
The other differences between bookkeepers and accountants are mentioned below for you to understand their distinction better.
Bookkeepers: The territory of a bookkeeper lies in everyday financial activities. It includes everyday purchases, sales, payments, and expenses. The process is usually performed with the help of journals and ledgers. Some businesses also use software such as Sage, QuickBook, Xero, Kashflow or Peachtree, among others, to maintain records. This effort of maintaining journals and ledgers concludes into making the trial balance sheet that ensures that the debits and credits match perfectly. Bookkeepers play an important role in building a firm foundation for the business by recording and managing the everyday financial information.
Because of the advent of the bookkeeping software, some aspects of accountancy have merged with bookkeeping processes as some of the software are now able to generate financial statements from the everyday ledger. This blurs some of the traditional lines between bookkeeping and accounting. In terms of experience, bookkeepers are required to have at least two to four years of experience or an associate’s degree to qualify for the job.
Accountants: The job of an accountant is to examine and verify the generated financial data so that they can create financial reports, analyse records, and perform audits. All this helps in preparing financial reporting records such as tax returns, income statements, and balance sheets. The analysis of the accountant about the financial information can provide an insight into business forecasts, market trends, growth opportunities, and cash flow management. Accountants look at the bigger picture and decide, among other things, on how to deal with the data and plan future financial management.
It is a high-level process which makes sense of the previously compiled information and converts them into financial models. It is highly subjective than bookkeeping, which is largely transactional. It brings key financial indicators together resulting in better understanding of profitability. Accountancy turns the information from ledgers into statements revealing the larger picture for the business. Accountants also help owners and managers in effective and strategic tax planning, tax filing and financial forecasting. In terms of experience, an accountant must have a bachelor’s degree in accounting or a degree in finance to qualify for the job.