Accounting vs Bookkeeping
Ah, accounting. Some of us love it, and some of us are scared of it. But all of us are capable of tackling it — and hiring someone to help.
We’ve covered this before, but let’s take another stab at the difference between accounting and bookkeeping.
Here’s our main conclusion.
Not every bookkeeper is an accountant – though every accountant is technically qualified to be a bookkeeper – and while both need to be sticklers for accuracy and knowledge of key financial topics, the main difference between a bookkeeper and an accountant is that an accountant has a bachelor’s degree in accounting or similar.
Bookkeepers have two to four years of experience or an associate’s degree, with their work overseen by either an accountant or the small business owner whose books they are doing. They record financial transactions, which lay the foundation for accountants.
And accountants have a bachelor’s degree in accounting – or a finance degree considered an adequate substitute – and interpret, classify, analyze, report, and summarize financial data.
Choosing An Accounting Method For Your Company
The first step to tackling your accounting is to establish the rules your company follows in reporting expenses and revenue.
There are two options you have to choose from — cash accounting and accrual accounting.
According to the Corporate Finance Institute, under the cash method, income and expenses are reported and deducted in the tax year they are received and paid. For the accrual method, both income and expenses are generally reported in the tax year when they are realized, regardless of when they are received.
The cash accounting option is simple and easy to implement and appropriate for smaller businesses. The accrual accounting method is a more complex and expensive option.
What Financial Records Should You Keep?
Keep all of it. We’re teasing – sort of.
It is best to save any and all kinds of records in an organized location so that you can access them quickly and easily when you need them fast.
This includes any W-2, W-9 or 1099 forms, bank statements, business expense receipts, invoices, insurance claims, investment statements, charitable donation receipts, tax returns, bills and pay stubs.
Forbes Advisor gives a detailed breakdown of how long to save which financial documents — both personal and business — and how to permanently get rid of the records you no longer need.
How To Organize Your Financial Records
Whether you’re a perfectly organized, place-everything-you-have-in-all-of-the-subfolders type of person or you’re a send-it-to-your-bookkeeper-and-get-them-to-do-it type of person, something like Google Drive or Dropbox may be a good option for you.
The quick-and-easy approach is to organize your records by category in chronologically ordered, labeled folders.
That way, when you’re on the hunt for that Apple receipt from the time you bought your employee’s work computer a few years ago, you know exactly where to look.
Free Up Your Time With BELAY Accounting Services
The best news about all of this is that our fractional Accounting Services can help you get it all done – right.
With BELAY’s customized, fractional nonprofit and business accounting services, consider yourself Goldilocks: Finances that are just right for you and your growing organization.
Getting started will be the easiest thing you do all day.