Bookkeeping and accounting – what’s the difference?
A common question we get asked a lot is whether there is any difference between accounting and bookkeeping, and the short answer is: Yes!
As for the long answer…
What is bookkeeping?
Bookkeeping is the regular, day-to-day process of understanding a business’s financial transactions. This helps business owners understand their day-to-day business operations, identify past-due trade debtors, spot duplicate invoices and budget for future outgoing payments.
A well-managed process also plays a vital role in helping accountants compile annual statutory accounts, ensuring every allowable expense has been correctly deducted and every tax-free allowance is used before the business’s corporation tax is calculated.
Accountants can also use a business’s bookkeeping records to help with financial forecasting, business planning and tax planning strategies they develop for the business.
Check out Wikipedia’s definition here.
What is accounting?
While bookkeeping is largely a backward-looking process over financial transactions that have already happened, accounting has the potential to be much more forward-looking and strategic.
Expert accountants can offer a wealth of financial and operational insights to help business owners improve their working capital, identify cost savings and accelerate the growth of their business.
For example, at The Accounts Centre we can help with business planning in order to help you capitalise on new technology, launch a new product, target a new client base or expand elsewhere.
Check out Wikipedia’s definition here
Does a small business really need both?
Business owners can choose to handle either (or both) if they have the time and expertise.
However, there are some very good reasons to get a professional to handle both.
Firstly, there’s time and money. Bookkeeping and accounting can be very time consuming, and it can also prove costly if you forget to account for allowance expenses.
Plus there’s a risk of HMRC penalties if you fail to comply with regulations, make mistakes or miss deadlines.
We offer the best of both worlds…
At The Accounts Centre our team are fluent in accounting and have a flair for managing regular bookkeeping so you can make better use of your time.