The Difference Between Accountancy & Bookkeeping
When operating your own business, regardless of the sector you operate in, you will likely come across and be familiar with a lot of what could be considered jargon.
As a business owner, you will be expected to know a fair amount of such technical phrases yourself, not just in your industry, but also in general business terms. Two such terms that are often mistakenly interchanged are Accountancy & Bookkeeping. Whilst these two do cover similar areas, there are distinct differences between the two – differences that you as a business owner need to be aware of. To help you get a better understanding of what these two terms mean, what they involve and how they differ, we have put together the following guidelines:
Bookkeeping comes before accountancy and is the first and most important aspect of a businesses’ financial process. Bookkeeping is the accurate and detailed recording of all transactions in chronological order. Therefore, any money-related activity to do with your business must be fully and accurately recorded. Whilst traditionally this was done manually, hence ‘book’, there are now numerous computer programs that can make the entire process much easier and far less time consuming, just like our dedicated Quant software.
Accounting is what you do with the financial information collected in the bookkeeping process. The analysis and study of your financial information is what an accountant does. The information collected during this process, including reports and statistics, is important as it is used for various purposes, such as:
- Enabling informed decisions regarding spending, savings and investment
- Providing an important insight into your businesses’ financial health
- Keeping stakeholders and external bodies such as HMRC informed regarding your company’s finances – including self-assessment tax returns, VAT reports and year-end accounts
- Enabling potential investors or buyers to easily examine your finances and get an accurate picture of your company’s financial status
The differences between bookkeeping & accounting
Whilst both bookkeeping & accounting are dependent on each other to some extent – they are still quite distinct and individual aspects of financial reporting. Bookkeeping can be considered the manual aspect of the financial process. That is, the first stage and one essential for the second stage to proceed – that of using this information – the analytical stage of the financial process. Issues with either can lead to problems that include poor decision making and even financial penalties being imposed by HMRC. Such problems can be anything as simple as inaccurate bookkeeping – with even small gaps in records often leading to tax difficulties later on.
With bookkeeping so important, it is useful to ensure you use best practices to avoid any problems, as well as ensure you make business decisions using the correct, latest information. We have put together the following tips to help you see what you should be doing in terms of bookkeeping:
Keep personal & business finances separate. As a business owner, you should operate separate bank accounts away from your personal ones. This will avoid any possible tax problems later down the line. With accurate bookkeeping so important – mingling the two sets of accounts together can lead to some serious headaches later on
Use bookkeeping software. Technology means there are now many different computer programs designed to allow you to quickly and easily input your financial information. What is more, this sensitive data is protected from damage, such as fire and flooding. This is particularly true if you use a ‘cloud-based’ bookkeeping program which also eliminates the need for physical space to be used to keep such records – such as our software here at Quant.
Stay on top. With accuracy so important, you should get into the practice of performing weekly and quarterly checkups. This will help prevent any gaps in your records from forming, as well as enable you to better identify any would-be problems, such as a decline in revenue, in addition to positive factors, such as the possible need to hire employees moving forward
Who is doing what? One aspect of bookkeeping that has traditionally been difficult is keeping a track of the time employees spend working on something – making it hard to budget for work being carried out and expected. Time-tracking software now makes this process much easier, as well as enabling you to keep much better track of other factors, such as overtime, holidays and sickness
Get help. Seeking advice from a professional can really help you with your bookkeeping. Not only can they advise you on any specifics regarding the size of your business or the industry you operate in, but will also be able to recommend you on what type of bookkeeping software would best suit your needs
Accountancy is considered by many to be more difficult than bookkeeping and therefore many business owners often seek the advice of a qualified accountant. We have compiled the following tips to help you get the most of your accounting:
Get help or go digital. You may be able to do all the bookkeeping and accountancy yourself – however, if you do not think you can, or even want to, you have two main options. First, you can invest in some bookkeeping or accounting software. Or even better, with a Quant subscription, your software is included free of charge! Despite any reservations, you may have or the size of your business, such software is now very easy to use – and can really help you keep better records and save time doing so. Your second option – and one that is often used in conjunction with software is the use of a qualified accountant. Such help can be got part-time, meaning you only have to pay for their services when you really need them. Again, our skilled team of advisers here at Quant can take this stress away from you for an affordable, monthly subscription.
Make sure clients pay. Regardless of how much you are owed – none of it counts until it is in your bank account. Ensuring your clients pay you on time ensures the ‘receivables’ aspect of your finances remains healthy – important to ensure your company remains afloat. You should be consistent and timely in providing invoices to clients and firm in your insistence that you are paid for good or services provided in time
Know how much you need to make. You need to be able to accurately calculate the minimum income you will need each month in order to continue operating. With income often the easiest related figure to be calculated, you are advised to work out a target amount that you will need to achieve each month. Knowing this will help you avoid any sudden surprises brought about by a downturn in business