Whether we like it or not, quality bookkeeping is a key ingredient for a successful business. If a business does not put proper bookkeeping practices into place, they could have business on a downward spiral and not even know it.
It is truly scary the number of businesses that do not have any bookkeeping methods or have nominal bookkeeping practices. What’s even scarier is that these are the same businesses that can’t, don’t or won’t file taxes because they have no clue what their business did for the year. Or worse yet, miss out on tax savings because their books are not organized in such a way that their accountant can help them maneuver them thru the labyrinth of tax laws.
Many business owners can and will do their own bookkeeping. Others invest in professional bookkeepers which can help prevent making very costly financial mistakes and allows the business owner the ability to have financial statements at their fingertips.
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There is a very big difference between accountants and professional bookkeepers. So let’s start with definitions. What is the difference between accounting and bookkeeping?
According to Dictionary.com, accounting is defined as:
1. the theory and system of setting up, maintaining, and auditing the books of a firm; art of analyzing the financial position and operating results of a business house from a study of its sales, purchases, overhead, etc.
2. a detailed report of the financial state or transactions of a person or entity: an accounting of the estate.
3. The rendering or submission of such a report.
Bookkeeping is defined as:
The work or skill of keeping account books or systematic records of money transactions.
BusinessDictionary.com defines accounting as:
Practice and body of knowledge concerned primarily with methods for recording transactions, keeping financial records, performing internal audits, reporting and analyzing financial information to the management, and advising on taxation matters.
Bookkeeping is defined as:
Systematic recording of financial aspects of business transactions in appropriate books of account.
So what does that mean to a business owner? Short answer…You NEED both to be successful. As the owner of BOS’ Optimal Solutions, LLC which provides professional bookkeeping services, I tell all of my clients a professional bookkeeper provides meticulous records identifying earnings, receipts, and payments in a manner that makes their accountants’ lives easier and gives them the building blocks to provide business owners with proper analysis of their financial situation.
Advantages of Using a Professional Bookkeeper
One of the biggest advantages of having a professional bookkeeper handle your bookkeeping is that it allows you as the business owner easy access to important information you need to guide you in making financial decisions.
For example, you make widget “X”. Do you know how much you have in the production and sale of that particular product? If you can’t answer an emphatic “yes” to this question, how can you know what to price it at or if you are marketing it correctly?
The second biggest advantage of having a professional bookkeeper is if a business owner determines they need some form of financial assistance. ALL financial institutions require a business owner to prove to them that they are a viable business and worthy of taking a risk on.
This means they want to see financial statements, cash flows, budgets and other financial data. Trust me when I say, this is not something that a business owner wants to have to pull together last minute. And when you are scrambling to collect or obtain information, I guarantee something will be forgotten.
By keeping up with your bookkeeping on a regular basis, you are able to track your data. You will have a better handle on how to continue making your business grow. Avoiding the bookkeeping of your business will cause you to end up with an avoidable financial disaster.