Bookkeeping and accounting are completely different. Although there are some overlaps, it’s important to know the difference between the two, especially when it comes to your small business. In this blog, we’ll run through bookkeeping vs accounting and highlight what you can achieve with the right tools.
Bookkeeping and Accounting: What’s the Difference?
Simply put, bookkeeping is when you make sure all of the financial transactions that your business carries out are accurate, recorded and tracked.
Accounting is when you take these transactions, analyse them and then pass them onto the right people - whether it’s business directors or HMRC.
What Do They Do?
Bookkeeping is all about keeping accurate records to make your life easier. Tasks include making sure daily entries are always correctly logged. If anything gets missed, then it’s going to mean that it’s harder to file accurate tax returns.
It also involves managing all expenses. Everything from building maintenance and mileage to travel costs and National Insurance can be reclaimed. This is why it’s so important to keep track of everything.
Bookkeeping also covers creating invoices for both sales and purchases, as well as making any bank transactions that are needed. To make the accountants’ job as easy as possible, they’ll log all of the business’ financial details in reports. Accountants analyse these reports when offering recommendations for your business.
Accountants are also responsible for producing tax returns, making sure they comply with the latest laws and regulations. They usually work for larger firms and have a variety of clients so you might only physically meet with them once or twice a year.
At the end of the financial year, they take all of your business’ financial data and fill out detailed statements, like the profit and loss report, which outlines how you’re performing. This information is then used to make essential business decisions.
Do You Need to Pay for a Bookkeeper?
There’s really no need for you to pay someone else to do your company’s bookkeeping. No matter how technical or complicated they might make it sound, the process is simple, straightforward and easy to do - as long as you have the right tools.
Unlike accountancy, you don’t need to have any qualifications or training to do your business’ bookkeeping. Don’t be put off by the idea of receipts and invoices. If you outsource your bookkeeping, then you’re paying for a service that you can do yourself.
Accountants train for years and learn highly specialised skills to be able to effectively analyse financial information. For help making critical business decisions, you’ll need to have the data looked at by an accountant.
Because their skills are highly specialised, accountants are usually pretty expensive. They’re worth the money though, giving you the insight needed to take the best course of action for your small business.
Is It Easy to Do Bookkeeping Yourself?
If you’d like to save yourself some money, then you can do your business’ bookkeeping yourself. This can be a pretty daunting prospect, especially if you’ve no real experience when it comes to daybooks, invoices and expenses.
You might already be recording invoices and receipts in paper form, but this is a recipe for disaster. It only takes a few misplaced bits of paper for everything to be inaccurate. This can be a real problem when it’s time to file those tax returns.
Even if you’ve developed your own ‘system’ over the years and you’re coping just fine by yourself, it’s time to think about an upgrade. With the right resources, you can do much better than just ‘cope’; you’ll have the knowledge you need for your business to thrive.
Rather than having to learn all kinds of complicated processes to manage your finances, you can just let an app do it for you.
What a Bookkeeping App Can Do
Take all the hassle out of small business bookkeeping by downloading an app that can do everything you need. There’s a wide variety to choose from making it easy to switch. The introduction of Making Tax Digital (MTD) means that you need to file tax returns digitally, so why not use an app that can do it for you?
When you’re comparing different apps, keep an eye on the bookkeeping features that each of them offers. Some will have hundreds of features that you’ll never bother with, no matter how much your business grows.
You’ll also benefit from choosing an app that doesn’t try and confuse you with unnecessary jargon. Bookkeeping isn’t complicated, so there’s no reason for the app to be either.
If you’re completely unsure of the features you need, then here are a few essentials:
- Finance Reporting
- Customer Invoicing
- Online Sync
As long as the app has these features, it’s able to provide all of the services that your small business needs.
Make Sure You’re Bookkeeping Like a Pro With Our Checklist
Bookkeeping doesn’t have to keep you up at night. Make sure you’re doing everything that the pros do by downloading our checklist. It’s perfect for making sure nothing has slipped through the cracks.
Get your free copy now by clicking on the link below.