Adieu, Summer Olympics 2024. Paris 2024 didn’t disappoint.
Were you like most of the world in watching? It seems like Americans were glued to all 13 days of nonstop competition both on live TV and through the ever-entertaining athlete social media streams.
And speaking of social media, thanks, Olympic committee, for relaxing rules around social media posting which brought us this.
Since most Olympic athletes aren’t superstars like Simone Biles or Usain Bolt, stirring up attention on TikTok and Instagram can mean opportunities for the lesser-known Olympians who don’t make much (if any) money on their efforts.
As a business person, you have to respect their game… Olympic and social media alike. They’re getting their names out there and getting paid for it (hopefully).
And there’s a lesson in that: Building your business presence means getting your name out there. Capitalizing on current trends and letting people see into your world, these are the things that build trust and increase business.
And as you increase business, you’re likely (make that certainly) dealing with one financial need or another. So you need to know where to look for help. Do you need help with bookkeeping or accounting – or both?
Many business owners I talk to don’t actually know the difference between bookkeeping and accounting, and thus, don’t know where to start when they need financial help.
I want to fix that problem for you today with a guide on the bookkeeping accounting difference.
Considering the Bookkeeping Accounting Difference In Your Minneapolis Business
“Risk comes from not knowing what you’re doing.” – Warren Buffett
Let’s go over the main point of difference between bookkeeping and accounting, and then cover some nuances to help you determine what you already have in place and what holes you need to fill.
The primary bookkeeping accounting difference is focus.
- Bookkeeping is the process of recording financial transactions, such as sales, purchases, and payments. It involves data entry, categorization, maintaining accurate records, and knowing what questions to ask to make sure all available data is harvested.
- Accounting, on the other hand, interprets and analyzes this financial data to provide insights into a business’s financial health. Accountants prepare financial statements, manage taxes, provide financial advice based on the data, and assist with strategic planning.
In essence, bookkeepers are the recordkeepers, while accountants are the financial storytellers. These are simplistic definitions – the roles encompass much more than this – but it can be helpful at times to summarize things in short manner.
Obviously, Minnesota businesses need both and one can’t be done without the other.
Now for the bookkeeping accounting difference guide to fix the problems in your own operation…
> Do you have a problem with obtaining accurate data to analyze?
Perhaps your data doesn’t accurately reflect what’s going on in the business, or perhaps you have no data even available to analyze. You need a bookkeeper with an eye for detail. This is typically what good bookkeepers are known for.
While often seen as a mere recorder of numbers, bookkeepers are actually the first line of defense on the data accuracy ball field. Errors at this stage can have cascading effects on financial statements and decision-making. Don’t overlook it.
Further, accountants depend on the accuracy of bookkeeping data to perform their analytical functions. Poor-quality bookkeeping can really hinder an accountant’s ability to provide the insights you need to make better business decisions.
> Do you have a problem knowing what to do with your financial data?
You need an experienced accountant to break it all down into understandable insights and actionable takeaways.
Some examples of what an accountant can do with the data your bookkeeper provides:
- revenue and expenses analysis to assess profitability
- cash flow examination to evaluate a company’s liquidity
- debt-to-equity ratio calculation to measure financial risk
- inventory turnover numbers to gauge efficiency in managing stock
- customer payment cycle analysis to assess collection effectiveness
- industry benchmarks to compare a company’s performance to competitors.
> Do you have a problem finding someone who knows your business well enough to provide informed financial support?
You likely need both a bookkeeper and an accountant to cross this bridge.
Bookkeepers can play a crucial role in understanding the narrative behind the numbers. When they’re familiar with day-to-day operations (interacting with clients, knowing how the business operates, etc.), their ability to know what questions to ask and where to look for data provides the context necessary for the accountants asking the follow-up questions.
And as technology advances, accountants are becoming more involved in the strategic decision-making you were after to begin with. Data analytics, predictive modeling, financial optimization – all the fun stuff.
Financial advisory professionals really do work together to make sense of all of the numbers for you. While the bookkeeping accounting difference is nuanced, it’s also designed as a partnership with business owners, helping you move forward with knowledge – and confidence.
Knowledge and confidence that is worth its weight in gold.
Here for you,
Grant Daffin