Small business owners turn to bookkeepers and accountants for help with their day-to-day financial transactions. Beyond record-keeping and financial analysis, advisory services can help startups develop or take established businesses to the next level. While all roles share a common goal, it’s important to understand what the differences are and what they each offer to growing small businesses.
What Is Bookkeeping?
Bookkeeping is a data entry role focused on the recording of daily transactions, primarily your business’s income and expenses. The bookkeeper’s records are the foundation for understanding how your business is performing.
The double-entry method of bookkeeping (debits and credits) is key to managing the financials of your business, as it is self-balancing and can very easily identify mathematical errors in the account totals. It isn’t a foolproof system, but a good bookkeeper will both keep the debit and credits in balance and record transactions to the correct accounts.
Some common tasks of a bookkeeper are:
- Recording financial transactions
- Entering bills from vendors
- Applying payments to Invoices
- Reviewing and maintaining the general ledger and sub-ledgers.
- Reconciling bank statements
Modern bookkeepers are fortunate to have a wide variety of tools and technology to improve both the efficiency and accuracy of their work. These “add-ons” integrate with an accounting software to create a full, modern bookkeeping system. Starting with a powerful, full featured accounting software such as Xero or Quickbooks Online, add-ons like Gusto and ADP can manage payroll, Bill.com tracks vendors and bill payments, and Shopify tracks customers and orders, just to name a few.
What Is Accounting?
Accounting is a more proactive, analytical process. The financial information that the bookkeeper has organized is then supplemented by higher level adjusting entries. The creation and review of the financial statements help the business owner understand the effects of their business’s activities and operations. This information can also be presented to investors, creditors, and regulators as the business grows and develops.
Some common tasks of an accountant are:
- Preparing financial statements (Income Statement, Balance Sheet, Statement of Cash Flows)
- Creating aged payables/receivables schedules
- Making adjusting entries that affect the balance sheet accounts such as retained earnings, deferred revenue and accumulated depreciation
- Interpret the financial statements to help the small business owner make decisions.
- Offer tax advice/filing services
An accountant can offer a more strategic review of your tax situation and offer guidance with planning and other services. Come tax-time, an accountant’s main goal is to strategically lower your tax liabilities through accelerated depreciation, retirement planning, managing charitable contributions and other write-offs.
What Is Business Advisory?
Whereas the bookkeeping and accounting roles mostly focus on your day-to-day operations and analyzing historical data and trends, the business advisor offers guidance and support for the complexities of a growing business and an uncertain future. Businesses, both big and small, pre-revenue or looking to scale their already successful model can benefit from advisory services.
Some key services offered by a business advisor include:
- Business Assessment & Discovery
- Financial Forecasts
- Fractional CFO
- Capital Deployment Strategy
- Growth Strategy
- Business Coaching
- Profitability Analysis
- Pricing and Cost Analysis
The advisor will learn the ins and outs of your business. For entrepreneurs just starting out, services like business coaching can develop a roadmap and align your team to be prepared to solve challenges as you grow. For established businesses looking to scale, the advisor can help with capital raising, fractional CFO, preparing investor decks and creating business plans. Your long term goals are the priority and focus of the business advisor, and their services can scale to meet the needs of any small business.
Would You Benefit From a Bookkeeper or an Accountant?
The size of your business and cash basis vs. accrual basis financials are the two most significant factors in deciding whether you would benefit from the services of a bookkeeper or an accountant. As your business grows, your needs may become more than what a bookkeeper is prepared to handle.
Some examples that it’s time to reevaluate include:
- Revenue streams expanding and diversifying
- More complex payroll as a result of growing your staff and offering more benefits
- Taking on investors and managing a capitalization table
- Opening new locations and operating in multiple states
- Increased complexity as a result of moving from cash basis to accrual basis financial reporting
Bookkeeper360 is in a unique position to meet all of these needs as we are a one-stop shop for bookkeeping, accounting, and advisory services. Our broad range of services can accommodate a new startup or growing business looking to take their operation to the next level. Our staff of CPAs, advisors and bookkeepers offer a personal approach combined with powerful technology, a winning formula to offer you everything you need to help your business succeed.