Being a creative professional can be as taxing as it is fulfilling, more so amid a raging pandemic that has ravaged the globe. Finding the balance between routine business management tasks and creativity is a challenge that small companies struggle to overcome.
If you need help understanding your company's books, you may wish to hire an accountant or a bookkeeper. But which one is better suited to help your business?
You might think bookkeeping and accounting are the same and that your business needs one of the two. The differences are trivial to most people, but creative entrepreneurs should learn to distinguish between both to know how each one can help their business.
Let's take an in-depth look at the difference between accounting and bookkeeping, their respective skill sets, and how they can propel your company forward.
Bookkeeping is a part of the accounting process that involves recording financial transactions of your business. This gives you an understanding of how much cash inflow and outflow your company has had for any given period.
This information will give you the ability to make more financially informed decisions for your creative business. Here are some tasks within the bookkeeping process:
- Recording cash inflow and outflow
- Payroll management
- Tallying balances against transactions
- Tracking assets and liabilities
- Upkeep of the general ledger
Accounting, on the other hand, is the second leg of the process. This involves using the data recorded by bookkeepers to analyze the financial stability and health of your business.
Accountants can offer insightful information that helps you chart your way to success and make more informed decisions in the capacity of a business owner.
These are some tasks accountants handle:
- Preparing financial statements such as balance sheets, cash flow statements, and income statements.
- Verifying information in journals and ledger entries and be on the lookout for mismatches in the books.
- Tax advisory to ensure that your business is not overpaying taxes and help you put your resources to the best use without taxes eating into it substantially.
- Business consultancy to help you make the most financially sound decisions.
In essence, bookkeeping and accounting are two sides of the same coin, and your business needs both just as much to be successful.
Bookkeeping and accounting seem very similar, but many differences set them apart as independent disciplines that are closely related but not the same. However, let’s first look at the skills bookkeepers and accountants need:
- Credentials: Bookkeepers can have an associate or bachelor’s degree in a non-specific discipline, but one related to finance is preferred. This profession requires no other special certifications.
- Organization: Learning how to be organized can go a long way in bookkeeping. The entire discipline is all about sorting, filtering, and recording transactions in books of record.
- Attention to detail: A bookkeeper must be account payable attention to minute details in a transaction and keep track of it as they record it to the best of their ability.
- Accuracy and time-efficiency: Being highly accurate while also being efficient with time resources is the zenith in the skillset of a bookkeeper.
- Credentials: Accountants need a bachelor’s degree in finance or accounting. Additionally, the best accountants are qualified as Certified Public Accountants (CPA) by clearing the Uniform CPA exam. They also have demonstrated professional experience.
- Analytical: The core function of an accountant is to analyze and study financial statements and provide valuable insights. Accountants extrapolate data to address issues plaguing the business, thereby playing a more critical role in a company's growth.
- Criticality: Another major role of an accountant is to spot discrepancies that might have crept into the books. Being critical of the information provided to them and rectifying these mistakes is a feather in the cap of an accountant.
- Communication: It may seem like an accountant’s job starts and ends with numbers on spreadsheets. But one of their major responsibilities is to effectively communicate the most financially sound ideas to stakeholders. ICAS reports that 30% of small businesses consider their accountants to be among their most trusted advisors.
People often think of bookkeeping and accounting as the same thing, and understandably so - given the overlap in their responsibilities. However, there are many differences between bookkeeping and accounting:
Learning how to manage your books can eat into the precious time and monetary resources of your business. In fact, as per a survey, nearly half of small business owners find bookkeeping and accounting stressful.
However, Artificial Intelligence and cloud accounting services can ease your worries and save your employees from hours of manual labor.
Artificial Intelligence (AI) is the pinnacle of our advancement in the modern era. Computers can now perform many functions that previously required human intervention, and often, they can outperform humans completely autonomously.
AI algorithms can be trained to do just about anything - including bookkeeping and accounting expenses.
Large datasets allow the AI to keep continually learning as it performs more functions. With time, these algorithms become far more efficient than their human counterparts, helping businesses achieve more.
A case study published in the Journal of Accountancy details a use-case of Robotic Process Automation (RPA) for tax and its efficacy compared to traditional accounting methods.
AI is especially useful in the accurate calculation of taxes and compliance because all data is handled and processed exactly according to the algorithm, allowing no room for human error.
Bookkeeping and accountancy may not be your forte - 60% of small business owners feel they aren't knowledgeable about accounting and finance. But every business needs to do its books to keep itself afloat and running.
Luckily, creative businesses and brands can redirect their resources towards more rewarding endeavors and creative pursuits by hiring a professional bookkeeping service.
Fincent can simplify your bookkeeping processes, giving you more time and money to channel your inner creative genius and craft your magnum opus.