Many small business owners are great at doing what they love. In fact, they’re so good at it that it turns into a full-time business. This provides challenges as the business owner focuses on hiring staff and ramping up production capabilities. One aspect of a growing company that can easily get overlooked is bookkeeping.
Many business owners have accountants that help prepare their taxes each year and stay on top of estimated quarterly tax payments. But many owners are at a loss when it comes to keeping their books in order on a daily basis. They often see this when it’s time to hand everything over to their accountant. That’s when they start to realize that the “shoebox” filing method for receipts and other important papers may not be the most efficient.
The Difference between Bookkeeping and Accounting
It’s easy to confuse accounting and bookkeeping. After all, numbers are numbers, right? To those focused on running a business, it may seem like accounting and bookkeeping fall into the same camp. And because many accountants also help clients with light bookkeeping, it gets even more confusing. But the two are very different.
Accounting is the process of tallying up income and expenses for the year, along with other financials, that are summarized, analyzed, and reported to the IRS. These numbers paint a picture of the business’s yearly and long-term health and are used in filling out tax forms when it’s time to compute and pay income taxes owed to the IRS.
Bookkeeping is the process of keeping track of documents and other information that pertains to daily business operations. Expense receipts and mileage logs fall into the realm of bookkeeping, as do bank statements and company credit cards.
The Role of Each
Generally speaking, a bookkeeper helps manage day-to-day expenses, banking transactions, receipts, accounts payable, and accounts receivable. They may also assist with audits when needed. A competent bookkeeper will also flag issues that look questionable or need attention from the business owner or office manager. Many bookkeepers work under the guidance of an accountant.
An accountant generates financial reports for the company, approves expenses and purchases, and oversees company data storage and management. Accountants also stay up-to-date on government regulations and industry standards. In many companies, accountants manage the bookkeepers.
Clearing Up Confusion
While some accountants also help with bookkeeping, the reverse is not usually true. Bookkeepers typically limit themselves to bookkeeping functions. There is no formal certification for either position, although accountants usually have an accounting degree.
Many accountants are Certified Public Accountants, also known as CPAs. This designation is only earned through extensive education, specific work requirements, and the passing of a rigorous exam. Not all accountants are CPAs.
Choose a Local CPA for Your Business Needs
Rich Adams at Adams Accounting Solutions is a CPA who specializes in the needs of small businesses in the Kansas City area. He’s also an IRS-registered tax preparer, as well as a Certified QuickBooks ProAdvisor. He helps businesses set up bookkeeping systems they can manage on their own or with his help. He helps companies prepare for tax time.
Give Rich a call at 913-888-9100 for answers to your questions about bookkeeping and accounting issues. He’ll help clear up the confusion.
