The fact that you are reading this suggests you are already aware of the importance of making all the right decisions in relation to your business’s finances. Responsible management of your organisation’s funds will help provide a strong platform for its survival and growth.
If, though, you are presently on the lookout for accountant professionals in Suffolk in accounting or bookkeeping in Suffolk – such as those we make available here at ST Accountancy – it might have appeared to you that you don’t know exactly what the difference is between accounting and bookkeeping.
Is that an embarrassing thing for a business owner or entrepreneur to realise? Well, no, not necessarily. The fact is that while bookkeeping and accounting are not exactly the same things, a lot of people do use the terms almost interchangeably. Plus, a lot of the distinctions between accounting and bookkeeping are subtle ones.
So, in a nutshell… what is the difference between accounting and bookkeeping?
An easy way to think of the distinction between accounting and bookkeeping, is that bookkeeping is merely the first part of the accountancy process. “Accounting”, then, is the broader and more encompassing of the two terms.
What do we mean when we say, “bookkeeping is merely the first part of the accountancy process”? Well, one source that sums it up well is Investopedia, which states that while “bookkeepers record a business’s day-to-day financial transactions… accountants focus more on the big picture.”
Or, to explain further, bookkeeping is more of a transactional and administrative process than accounting; it focuses on organising and recording all of a given business’s financial transactions. It is a day-to-day process for which unstinting accuracy is essential. There is no room for error with bookkeeping, because it is the process that tells you exactly what money is going out of your business, and what money is going in – as well as when that money is going in or out.
Accountancy, on the other hand, is more subjective. It is about taking the information that a bookkeeper provides, and using this to give insights into the financial health of the given business.
As you can hopefully sense from the above explanation, both bookkeeping and accounting are crucial parts of a business’s financial management, and the two processes naturally go together.
Whereas bookkeeping focuses on the measurement, recording, storage, and retrieval of the given organisation’s financial transactions, accounting is more about how this body of financial knowledge is interpreted, summarised, and communicated.
Or to put it in other terms, bookkeeping involves gathering and storing financial data, while accounting relates to the manner in which the information is interpreted for such purposes as financial forecasting and ensuring the business in question makes the most informed decisions.
Does this mean I need to hire a bookkeeper and an accountant?
The short answer to this question is: no. Although bookkeepers and accountants can absolutely be separate entities, and many aspiring accountants start out in their careers as bookkeepers, as we mentioned above, “accounting” is the broader term than “bookkeeping”.
So, a suitably capable accountant will be able to take on both your bookkeeping responsibilities and your broader accounting for you.
We provide accountancy in Suffolk, so if you have any further questions about the differences between accountancy and bookkeeping, or you would simply like to learn more about our own acclaimed services in these areas of expertise, please don’t hesitate to reach out to us via phone or email. We would be delighted to discuss the possibilities for how we could work with your business.