Managing business finances is no easy task. Keeping track of every penny spent and monitoring petty cash transactions is as important as it is tedious. This is why an increasing number of businesses are opting for accounting services outsourcing. By entrusting back office operations on the shoulders of capable bookkeeping and accounting services firms, company leaders can focus better on the tasks that can create visible value for their business.
In the process of handling their finances and framing rules for the same, organizations often fail to see the difference between the jobs of an accountant and a bookkeeper. The two terms often used interchangeably, do not have the same meaning and neither do they signify the same job. Bookkeeping services and accounting services offered by firms are two separate functions of the back office and it is about time that companies understand the distinction.
Are you still ignoring your back office? Read our blog: Here is How Back Office Services Help Scale Businesses
Below is the difference between bookkeeping and accounting services to help you make a more informed decision about your business needs.
Bookkeeping refers to the process of recording all the daily transactions of the business via any mode consistently. Bookkeeping services small business can be considered as the backbone of their financial situation and a key element towards the financial success of the business. Bookkeeping services generally comprise of the following functions:
Accounting tasks are more complex than bookkeeping. Accountants need to deal with complex numbers on a daily basis – the numbers that have been posted by the bookkeeper in the general ledger. Accounting services consist of processing the financial data and coming up with financial models for the business. Moreover, accountants also act as an advisor to the key stakeholders of the business about the best practices of handling their accounts, investments decisions and other related tasks.
Accounting services mainly comprise of the following tasks:
Bookkeeping and accounting services when taken together, form an integral part of the business back office. The recorded financial statements and the analysis of the data can help businesses make informed decisions with insights into the profitability of their business model and the actual cash flow in and out of the company.
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The practice of outsourcing accounting services has been prevailing among SMBs and enterprises for a while now. There are several reasons why an increasing number of businesses are partnering with firms that have expertise in managing the back office operations.
1. One-Stop Solution for Companies
Business do not need to hire a separate bookkeeper and an accountant if they choose to outsource their back office operations. Most small business owners often only hire an accountant to save costs, relying on the one person to manage the bookkeeping too. Accountants are often over-qualified for the job of a bookkeeper which might lead to resentment, affecting his accuracy during the job.
Outsourcing accounting services, on the other hand, can help businesses get access to bookkeepers and accountants separately, under one single pricing package. With bookkeeping and accounting services outsourcing, business owners can get their financial records and statements ready without having to worry about hiring a separate bookkeeper and accountant.
2. Being Tax Ready
To be able to file for tax returns on time, businesses need to have a year-long record of their financial transactions. This is not possible without a bookkeeper while filing for returns is not possible with an accountant. Accounting services outsourcing has made the tax filing process easy for businesses.
When it comes to taxes, companies need to be very well aware of the contents and validity of their financial records. Firms that offer bookkeeping services small business help SMBs not only with an accurate bookkeeping ledger but also by helping them file for returns and apply for tax cuts.
3. Auditing Made Easy
Another area where both bookkeeping and accounting services are needed together by companies is during audits and fund-raising events. Small businesses are exempt from audits generally but when it comes to raising funds, they need end-to-end audit support. Outsourcing accounting services is the best way to prepare for an audit coming up.
This is because accounting services outsourcing firms have both bookkeepers, accountants and trained professionals with years of rich experience who can help businesses sail through the process right from preparing the financial report to liaising with auditors and getting the job done.
Pick the right accounting services provider for your business? Read our guide – 8 Points to Examine Before Choosing an Accounting Services Partner
Businesses often overlook the importance of back office when they first set up shop. Even when small businesses start to make their mark in the market, they tend to be oblivious to the losses they are making because of faulty back office operations. Most business owners initially manage their own bookkeeping and accounting, often leading to mistakes that they only discover in the long run.
Accounting services outsourcing is a great workaround for businesses who want their finances in professional hands but also have a budget to maintain. With the right outsourcing partner, companies get both bookkeepers and accountants to do their respective jobs seamlessly. The key stakeholders of the organization can then understand their business cash flow better, uplift their decision-making practices and be aware of their tax liabilities.
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