Bookkeeping vs Accounting: What’s the Difference?

Bookkeeping vs Accounting: What’s the Difference?

Are you finally considering hiring an extra hand or two to help you manage your business financials? But based on your business and your current needs you may be wondering, should I hire an accountant or should I hire a bookkeeper?

In this post, we’ll highlight the differences between bookkeeping and accounting and some key considerations to help you determine what is right for you and your business.


What is bookkeeping?

The definition of bookkeeping is the process of monitoring various day-to-day financial transactions for organizations or individuals. Bookkeeping responsibilities can range from a variety of simple to complex functions. Simple functions can include recording purchases, generating customer invoices, or managing payroll, whereas complex functions can be budgeting, cash flow projection, developing financial systems and software conversions.

If considering a bookkeeper make sure to look for specific accreditations offered through bookkeeping-specific organizations, such as the Certified Professional Bookkeepers of Canada (CPB Canada).


What is accounting?

Accounting is a high-level view of the financial health and position of the business. Although similar to bookkeeping, it is more subjective as accountants typically provide business owners with financial insights such as their financial position and cash flow based on the information collected and prepared from bookkeeping data. Typical responsibilities can include generating reports, performing audits and preparing financial documents such as tax returns, income statements and balance sheets. In addition, accounting can help with strategic planning, by augmenting the daily or weekly management reporting.

In terms of accountant certifications, there were three commonly accepted types in Canada. This includes the Chartered Accountant (CA), the Certified General Accountant (CGA) and the Certified Management Accountant (CMA). However, in recent years these designations have been amalgamated into one designation called the Chartered Professional Accountant (CPA).


Determining which is right for you

While bookkeepers and accountants each have their own roles and responsibilities, it’s not as simple as choosing one over the other. Ultimately, bookkeepers and accountants work together to provide an overall financial picture of the business and are both especially important if you are experiencing or plan to experience significant business growth.

No matter the business size, organizations may need accountants to prepare reports to measure their progress or other financial statements, which would require the operational tracking a bookkeeper provides. Bookkeepers get to know the business very well and can be a great source for discussion, advisory functions and financial planning.

A consideration to keep in mind is that bookkeepers typically work on a daily, monthly or weekly basis, which is a key component to building a financially viable business. Whereas an accountant generally steps in near the end of the year to help prepare financial statements and the tax return. Ultimately, having a good bookkeeper and a well-organized accounting system can help you stay on track throughout the year and reduce your accounting costs significantly.


A takeaway from KBBS

At the end of the day as your business grows, so will your bookkeeping and accounting duties. Hiring a professional is key in continuing your growth and allows you to focus on what’s truly important.

The goal of KBBS is to help you create and maintain a system that will enable you to make informed business decisions with confidence and ultimately thrive, grow and profit. Whether it’s helping you manage your everyday transactions or business taxes, KBBS has got you covered.

What Do I Need To Know About My Financials? A Question for Small Businesses

What Do I Need To Know About My Financials? A Question for Small Businesses

Let’s face it, being a small business owner is no easy task. There is no shortage of things to manage, however understanding your financials, or at least having a team to help manage them and keep you informed is key to your success. In this post, we highlight why it’s important to stay on top of your financials, and areas to prioritize your involvement. 

Staying on top of your financials

Your business financials are a strong indicator of your business’ health and what you can expect in the future. Moving forward, you’ll be able to make the best decisions for you and your business and build a solid strategy to achieve your goals. Whether it’s making additional investments, identifying requirements to apply for business loans, or deciding to release a new product, you’ll be able to proceed with confidence knowing you have the financial resources to do so. 

Example strategies and outcomes

Here are further examples of how understanding your financials can help you make the best decisions for your business and business goals.

Investing in new assets 

Say you decide to invest in new assets – for example, new computers for your employees. Having a strong understanding of your current financials, allows you to easily determine how you will pay for this investment and when the investment will pay itself off. 


Securing a loan 

One day you hope to secure a loan, in order to complete a specific project that will have a strong return on investment. Being able to identify how much is required, how much you can afford to borrow and when you will be able to pay it back are all extremely important factors to map out. If you do not have a strong understanding of your current financials, you may fail to secure the loan, or worse, fail to earn a return on your initial investment. 


Filing taxes

It’s that time of year, tax season. Being in the loop with your finances takes the headache out of filing taxes. You can easily determine your revenue and identify your expenses in order to stay compliant with tax liability. Not only that, you will get the most out of your deductible expenses, by knowing what ones to write off.

Key areas to focus on

While the more you know and understand about your financials, it can be overwhelming to stay on top of it all. After all, you didn’t start a business to crunch numbers in the evening. 

Here are some key areas to focus on to give you a solid understanding of your business’ financial health. 

Balance sheet: according to Investopedia, a balance sheet is a financial statement that reports on a company’s assets, liabilities and equity at a specific point in time. 

Income statement: BDC describes an income statement as a fundamental document to make up a company’s financial reporting, showing the profitability of a business over a specific period of time. It summarizes revenues and expenses, and also shows the company’s net profit or loss. 

Cash flow statement: a cash flow statement, otherwise known as a flow statement, determines and summarizes the amount of cash or other cash equivalents that enters or leaves a business.

Signs it’s time to hire a bookkeeper

Again, while it’s wise to keep an eye on your finances, that doesn’t necessarily mean you have to be the sole person managing them. If you’re struggling to manage the growing list of to-do’s, hiring a bookkeeper can ensure that you stay on track and meet your business goals, allowing you to focus on the other important aspects of your business. 

Check out our post, where we highlight what hiring a bookkeeper can do for you.