The Differences between Accounting and Bookkeeping
Both are necessary and interdependent but hiring someone with expertise in one without the other can be problematic. Understanding how QuickBooks is structured, the necessary workflows, and how to enter and edit records and data are necessary to being a ProAdvisor, but without an understanding of Accounting it becomes very difficult to deliver credible service to clients on two fundamental goals-proper Financial Accounting (compliance) and Managerial Accounting (data that business Owners/Partners/Managers need to make informed business decisions). Simply put, Accounting and its’ associated rules, estimates and principles provides guidance on how entries or records should be and, in some cases, must be made to reflect the substance of a transaction. Bookkeeping is the act of entering transactions, editing records, correcting errors and maintaining records that should be done in accordance with the correct accounting treatment.
Clients need sound data based on an analysis of financial statements. This data is the logical output of the work that accountants and bookkeepers perform. If the methods or work are flawed or incorrect, the financial statements, depending on the magnitude of the problem may either be erroneous or worse, misleading. Client’s that base decisions on statements that are less than reliable could prove to be a costly mistake. As an example, I’ve experienced situations where a client’s gross income was overstated (due to the misclassification of bank deposits that overstated revenue). This led to tax payments in excess of what they were obligated to make.
Businesses are diverse and evolve over time, but a few things will however, always remain constant. At a minimum, clients require friendly, competent, proficient, accounting and bookkeeping services. As technology improves and makes outsourcing of accounting functions more attractive to clients of all types and sizes, these independent contractors will need to become more service-centric, flexible and yes, mobile in their approach to gain their clients’ trust as a fiduciary to be regarded as credible, professional advisors.