New business owners often confuse bookkeeping with accounting. So, what is the difference between a bookkeeper and an accountant? There’s an old joke that says the difference between the two is about $200 an hour, but it goes well beyond a difference in cost. Bookkeeping is involved with keeping a record of income and expenditure, whereas accounting is concerned more with analysis of data and preparation of reports. An accounting firm will often have skilled bookkeepers on staff, because both elements are important to the proper functioning of a business.
If you hire an accounting firm to handle your taxes, you will find that they probably offer bookkeeping and payroll services as well. The bookkeeping department can make the life of a business owner more efficient and less stressful in a number of ways, some of which we will enumerate here.
1. I Don’t Wanna – For some business proprietors the task of bookkeeping to be onerous and therefore they do a terrible job of it. A bad job on the books can have serious repercussions when it’s time for tax preparation. If you hire a bookkeeper you will be getting someone who keeps books for a living, someone who actually thrives on the detail work.
2. Time – What might take you four or more hours in a week to do poorly, your bookkeeper can get done in half the time, and get it done right.
3. Where’s That Darn Receipt? – If you have an equipment breakdown and need proof-of-purchase to get a tool or machine fixed if it’s under warranty, or replaced if it isn’t, you want to be able to find that paperwork immediately. If all your receipts for the year are stuffed helter-skelter in shoe boxes and paper bags, you won’t be a happy camper.
4. Audits – Having your books in order can help if you are ever audited. It makes it easier to prove your documentation if you are able to produce it in a timely manner.
5. Response Time – You may have to make snap decisions on purchases, inventory and selling prices; having figures at the ready will help you make better decisions more quickly.
6. Direction – If your books are well organized you will be able to spot some trends even before your accountant is able to give you a more complete reckoning.
7. Employee Hours – You will be able to tell if you are using your manpower wisely if you can keep a running tab on how much you are spending on labor compared to the amount of revenue you are generating.
8. Accounting – Your accountant will organize your books if it is necessary, but this takes additional time, and usually at a much greater cost.
Larger companies have separate bookkeeping and accounting departments, and they do so because it helps them to better track their business. It also enables them to make better plans and adjustments for the future. You can get the same kinds of results if you take advantage of an accounting firm that also offers quality bookkeeping.