Usually, accountants are seen recording business transactions, handling payroll, and keeping track of all business documents. At the same time they use the word “bookkeeping” to tag some of these tasks, and other times they use the term“accounting”.
For business owners, this might be a little confusing as some may mistake accounting and bookkeeping as interchangeable.
What is bookkeeping?
Bookkeeping means the process of organizing and entering all financial transactions in one place. The end goal is to produce accurate financial statements. For example, bookkeeping includes:
- Record all bank and financial transactions
- Produce invoices to clients
- Organize data and produce financial statements (Income Statement, Balance Sheets, and Statement of Cash Flow)
- Keep balance for general ledger
- Handle payroll work (e.g. calculating salary and book-entry)
What is Accounting?
Accounting involves the process of analyzing and interpreting financial data. Business owners hope to make informed business decisions from past and present operation data. Therefore, bookkeeping is part of accounting. Several procedures are involved in accounting work:
- Prepare financial statements (Just as bookkeepers do)
- Calculate profit tax
- Make sure accounting books are aligned with accounting standards
- Analyze operations costs
- Prepare Budgets
- Assist business owners to make informed business decisions
Why is bookkeeping important?
As the saying goes: “Garbage in, garbage out.” It means having accurate data is crucial for analysis. Without accurate data, even an excellent analysis will result in misleading actions and inaccurate decision-making.
The job of a bookkeeper lies in tracking, recording, and ensuring the accuracy of financial transactions. The role of a bookkeeper is important because they are the backbone of the financial reports prepared by any business or institution.
- Business decisions are made using the data prepared by the bookkeeper.
- An auditor’s opinion will be determined by the accuracy of the bookkeeping of a company.
- An accountant’s analysis of the financial statements is based on the bookkeeping prepared by the bookkeeper.
- Shareholders and investors rely on the financial information prepared by a bookkeeper to make business decision
In summary, bookkeeping is the foundation of any financial information published by a business. It needs to be accurate, detailed, and comprehensive.
Given there is no professional knowledge inside the job, even though it is important, it is now being replaced by computer software, like cloud accounting software. Some cloud accounting software includes “bank feed” features that minimize the bookkeeping process. “Bank feed” means you connect your accounting software to your business bank account. Your bank will transfer your business transaction instantly and safely to your cloud accounts. It allows business owners can get access to their business data without hassles.
Why is an account’s role important?
As mentioned, the process of accounting is very important in every organization. It goes beyond keeping financial records to analyzing financial data. The following points detail the importance of an accountant and the benefits that can be derived from having one in a business organization.
Make Better Business Decisions
Analyzing and communicating their findings from the financial statement being generated by the bookkeeper is the major role of an accountant. This helps to drive insights and improve operations. For instance, when a company is looking forward to improving revenue generation strategy, the role of an accountant here is to devise a strategy based on the financial report and past performance of the business. The strategy may involve cost reduction or seeking alternative revenue sources, especially in small business bookkeeping.
The accountant and the marketing team also work together to ensure that the company has the financial capacity to execute marketing campaigns aimed to drive revenue generation. . Businesses need a professional accountant to help steer the company in the right direction financially. Without a good understanding of financial information, business owners will act like driving without a compass.
Profit tax filing is a critical process for every business as it includes many details on calculations. This is an expenses business owners want to avoid the most when it directly drive away profits. An excellent accountant understands every taxation requirement from the jurisdiction and they act accordingly. They hope to fulfill their obligations while at the same time minimizing the tax companies need to pay.
Stay with the law
Establishing businesses in a city with a sound legal system like Hong Kong, you can expect that there are a lot of compliant requirements to keep doing business as a fair game. However, it is not always easy to understand all of them when business owners need to focus on driving revenue. As professionals, accountants need to pay attention to reporting standards and compliant requirements in Hong Kong, such as annual audit requirements, to stay with the law. Accountants can remind business owners to act early and prevent suffering from any penalties.
In short, we hope that you can differentiate between the two similar concepts in business. Those are important concepts but somehow we easily overlook their importance in the real business world. Partnering with a professional accountant can make your life much easier. If you handle your accounting and bookkeeping yourself, feel free to check out a detailed guide of bookkeeping and find bookkeeping services near me.