Are you running a small business in Toronto or the Greater Toronto Area? If so, you may be looking to outsource some of your administrative work to a bookkeeper or accountant. But do you know which one your company requires more?
When most people think about bookkeeping and accounting, they would be hard-pressed to describe the differences between each role. It’s true that bookkeepers and accountants do share common goals of supporting your business in different stages of the financial cycle. However, bookkeeping is more transactional and administrative, while accounting is more subjective. Bookkeepers are primarily concerned with recording and tracking your financial transactions. Accountants generally offer you business insights based on the bookkeeping information.
Read on to find out the functional differences between accounting and bookkeeping, as well as the differences between the roles of bookkeepers and accountants. With this information, you will be able to make an informed decision about who you need to hire for your small business!
The Role of a Bookkeeper
Bookkeeping is the process of recording daily transactions in a consistent way that’s crucial to building a financially successful business.
Bookkeeping consists of:
- Recording financial transactions
- Posting debits and credits
- Producing invoices
- Maintaining and balancing subsidiaries, general ledgers, and historical accounts
- Completing payroll
Keeping a general ledger is one of the main parts of bookkeeping. The general ledger is a basic document where a bookkeeper records the amounts from sale and expense receipts. This is known as posting. The more sales that are completed, the more often the ledger is posted. A ledger can be created with specialized software, a computer spreadsheet, or the old-fashioned way – on paper.
When it comes to choosing the type of bookkeeping system you need, it often depends on the size of your business and the number of transactions that are completed daily, weekly, and monthly. All sales and purchases made by your business need to be recorded in the ledger, with certain items needing supporting documents.
Here at Milky Way VAS, I am a QuickBooks ProAdvisor and a Xero Certified Advisor. I use these cloud-based programs to offer your business professional outsourced bookkeeping.
The Role of an Accountant
Accounting is a process that takes the financial information organized by a bookkeeper or business owner and uses it to generate financial models. The process of accounting is more subjective than bookkeeping, which is mostly transactional.
Accounting consists of:
- Preparing adjusting entries (recording expenses that have occurred but aren’t yet recorded in the bookkeeping process)
- Preparing company financial statements
- Analyzing costs of operations
- Completing income tax returns
- Aiding the business owner in understanding the impact of financial decisions
The process of accounting provides reports that bring crucial financial indicators together. The result is a better understanding of actual profitability and an awareness of cash flow in the business. Accounting turns the information from the ledger into statements that uncover the bigger picture of your business and the path it is on. Business owners will often look to accountants for help with strategic tax planning, financial forecasting, and tax filing.
A Cross-Over in Roles
Since the advent of accounting and bookkeeping software, some parts of the accounting process have simply been absorbed into the bookkeeping process. For instance, here at Milky Way VAS, I don’t just handle the basic bookkeeping. I do it all! From accounts payable, accounts receivable, and bookkeeping set up, to tax filing and tax preparation – when you hire Milky Way VAS, you’re getting a complete, efficient service that doesn’t require multiple people for the job.
But you know what else?
I care about each and every one of my clients.
I believe in building a relationship with you and your books so that I can understand your business and go the extra mile to offer advice about the best choices for your finances. Your success is my success, and I’ll go above and beyond to ensure that you’re making all of the best choices when it comes to your small business in Toronto.
The Bottom Line
Organized financial records and properly balanced finances are the key to any successful business. In fact, 30% of small businesses fail within two years because their expenses far outweigh their profits. When you hire Milky Way VAS, you’re basically saving money because we’ll stay on top of your books to make sure that never happens to your small business.
So, if you were sitting there debating between an accountant or a bookkeeper, why not hire Milky Way VAS and get the best of both worlds? I’ll be happy to handle payroll, customer invoicing, and so much more! Even if you already have an accountant on staff, I’m more than happy to liaison with them.
Don’t hesitate to reach out to Milky Way VAS. I am more than happy to answer your questions and build a plan for all your financial needs.