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What is the importance of Bookkeeping and Accounting to your Business?

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Bookkeeping and Accounting

The tasks and responsibilities of bookkeeping and accounting are of the utmost importance to any business, no matter the size or industry of the business.

Summary:

 

  1. What is meant by Bookkeeping and Accounting?
  2. What is the difference between Bookkeeping and Accounting?
  3. Qualifications of Bookkeeping and Accounting
  4. New Age Bookkeeping and Accounting
  5. The Importance of Bookkeeping and Accounting
  6. Conclusion

 

1. What is meant by Bookkeeping and Accounting?

 

The tasks and responsibilities of bookkeeping and accounting are of the utmost importance to any business, no matter the size or industry of the business. The finances are crucial to the survival or growth of any business and as such, keeping detailed records and careful analysis of these records can be the difference to a successful business.

 

The skill of bookkeeping and accounting has always formed an integral part of business throughout the ages and although the thought of crunching numbers seems like a nightmare to some, the profession provides interesting stories and fascinating pieces of history. 

 

In fact, it is alleged that the first recorded name in history belonged to an accountant. Recorded some 5,000 years ago a man named Kushim recorded a transaction of Barley. To show that bookkeeping can have a fun side, the word bookkeeping is the only word in the English language to contain three sets of double letters back-to-back! 

 

With its own spelling anomaly and unique place in history, bookkeeping and accounting practises have always been part of the business world and are arguably more important now than ever before. 

 

2. What is the difference between Bookkeeping and Accounting?

 

Although bookkeeping and accounting fall into the same bracket of the financial sector, there are many differences between the two. The main differences between bookkeeping and accounting can be seen through two specific areas: qualifications and the tasks provided.

 

Black and White vs Reading Between the Lines

 

Whilst it can be hard to fully point out the differences between bookkeeping and accounting as they do share similar aspects, it can also be said that their functions support businesses in different ways and at different stages of the business and financial cycle. 

 

Bookkeeping contributes to the administrative processes of keeping diligent records of all transactions of a business. The goal is to keep consistency throughout all financial transactions and recordings to ensure the smooth running of the business. Tasks may include:

 

  • Processing of invoices 
  • Processing of payroll 
  • Recording of day-to-day expenses

 

Accounting, on the other hand, can be seen as the process of reviewing and analysing the financial records of a business in order to create a financial model or plan for the business. This takes a more analytical or subjective approach to interpret the financial data and be involved in complex business decisions that can have a major impact on a business. Due to the nature of the area in question, there are also many financial documents that legally need to be overseen and signed off on by a qualified accountant. Some of the tasks accountants complete include:

 

  • Analysing Operational Costs
  • Performing Audits
  • Filing of Tax Returns, Tax Planning and Tax Advisory

 

So while the process of bookkeeping is vital for businesses, the full accounting process can carry a greater impact on businesses’ growth and prosperity. With these greater responsibilities, the differences in qualifications needed for bookkeeping and accounting become more apparent. 

 

3. Qualifications of Bookkeeping and Accounting

 

Bookkeeping

 

The job or tasks included in bookkeeping on their own do not require a qualification. This is not to say that qualification does not improve on the skill set or credibility of a bookkeeper, but the tasks can be performed or entrusted to someone with the right profile. With that said, many businesses, especially start-ups or smaller businesses may only require a bookkeeper due to their stage in life and/or cost constraints. With the demand in the market, it always helps to have a qualification behind you for greater credibility in the job market. There are many courses available, with some very well renowned associations providing them.

 

  • The Institute of Certified Bookkeepers (ICB) is the largest bookkeeping institute in the world through accredited providers and it offers diplomas and certificates in bookkeeping.
  • The Association of Accounting Technicians (AAT) has a range of different bookkeeping qualifications that, through absolute completion, allows you to claim the title of a licensed bookkeeper.
  • Xero Certification is another route into the bookkeeping profession that includes training yourself on one of the many bookkeeping and accounting software systems. Although not traditional, the use of online systems has grown rapidly in the last few years, and having the skills to use them could allow you to fastrack your career and even aid in setting up your own book business.

 

Accounting

Accounting, on the other hand, does require a further college education and a serious qualification provided by large associations. Individuals can start their accountancy careers through certain degrees mainly focused on finance. However, in order to become a chartered accountant at the highest level, a qualification from one of the accounting associations is required. The largest and most respected are:

 

  • Association of Accounting Technicians (AAT) accounting courses are made up of four qualifications through three levels (Levels 2-4), that combine industry knowledge and practical work skills.
  • Association of Chartered Certified Accountants (ACCA) qualifications is a global association that was founded in 1904, has centres in 51 countries with over 200,000 members and 500,000 students across 179 countries. The ACCA provides a plethora of courses and qualifications.
  • The Institute of Chartered Accountants in England and Wales (ICAEW) is also referred to as the ACA and provides chartered accountant status upon completion of 450 days of practical work experience and 15 exam modules.
  • Chartered Institute of Management Accountants (CIMA) was founded in 1919 and boasts over 250,000 members. The CIMA focuses on Management Accounting, which provides a fantastic base for Financial Director and CFO roles.
  • Chartered Accountants Ireland (CAI) is the association to provide chartered status in Ireland. The CAI oasts over 30,000 members and its courses are designed to keep up with the current industry trends in Ireland.

 

As a business owner, knowing the difference between bookkeeping and accounting can be made easier with the majority of associations having a great presence online, allowing you to research what you need for your business. 


4. New Age Bookkeeping and Accounting 

 

As with so many industries, the world of bookkeeping and accounting has been upgraded and developed through the importance of the internet and technological advancements.

 

 As mentioned already, bookkeeping and accounting software is now common practice, and the adaptation of these systems offers new ways for business owners to streamline and improve their accounting processes. Check out our article on The 3 Best Accounting Software of 2021 to see what you could be implementing in your business.

 

Another development that is of major importance and advantage to business owners today is the rising prominence of the online or virtual bookkeeper or accountant. In this way you can outsource your bookkeeping and accounting processes to an expert for a lower cost, allowing you to avail of experience and expertise in a more cost-effective manner. 

 

5. The Importance of Bookkeeping and Accounting

 

Considering the amount and also the importance of the tasks involved in bookkeeping and accounting, recruiting or retaining a trained and qualified professional is imperative to any business, especially one with aspirations of growth. While many small business owners may see some of these tasks as a way of cutting costs by doing it themselves, the potential pitfalls that come with mistakes or lack of knowledge can far outweigh the money initially saved. Aside from potential fines, one of the greatest benefits is the freeing up of time and the peace of mind that comes with having a professional handling your books. Business owners work hard enough, dealing with many stressful situations without the added weight of tax deadlines and keeping complicated ledgers in order!

 

With so many different elements to the financial world, added to the many types of expertise from different bookkeeping and accounting qualifications on offer, the benefits of taking on an expert are of great importance. Aside from the many tasks we have mentioned, processes such as trying to raise funds or dealing with banks are common areas most accountants can help with. They can ensure that you are better prepared and see the future of your business clearly with appropriate and disciplined forecasting.

 

6. Conclusion

 

Bookkeeping and accounting have been with us through the ages. Both professions retain an important position and are well respected in the business world due to the positive impact that can be provided with best practices. 

 

For business owners, maybe like you, the choice between what is needed for your business needs to be researched and assessed properly before deciding which role you require, but you should also decide whether having an in-house or outsourced professional will benefit you the most. While this may seem as daunting as actually doing the books yourself, there is help you can avail of in that department as well! Have a look at our article on Outsourced Bookkeeping.

 

Instead of trawling through the sea of information, save yourself some time and stress by visiting Welink Accountants where in just a few clicks, you can be matched with a qualified professional that will be able to take your business forward.

 

The best part about WeLink Accountants? It's completely free, with no obligations and most (if not all) of the experts on the site provide a free consultation so you can find the right fit for you.

 

Every business owner wants the best for their business and to improve wherever they can. The use of online bookkeeping, whilst having potential downfalls is an area any small or growing business owner should look into. As with any service, once you have made the decision to actually use said service, the next step is usually the most important and the most difficult - How do I make the right choice? Where do I find a bookkeeper or an accountant?

 

Luckily for today’s business owners, as the market for online bookkeeping has grown, so have the tools to find the right one for your business. The platform Welink Accountants will help you to easily find the right fit for you by filtering out what you don't need in just a few simple clicks. The service is free and will put you in direct contact with an expert who will be able to help you.

 

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