The Difference Between Accounting & Bookkeeping

Accounting and bookkeeping are two things that every company should ensure they keep on top of if they want their business to be a success. While it can take a long time, involve a lot of paper, and potentially mean that you’re employing a whole department of staff when you could be putting that money elsewhere – it’s something that will pay for itself and improve your business in many ways. To avoid the time and hassle of setting up a department or handling the process yourself, using an external accounting and bookkeeping service can ensure you get professional information and advice with minimal time and effort.As Iain Scott from a leading firm of Aberdeen accountants explains, its important to understand the difference between the 2 professions.

Keeping a close eye on the state of your finances, your cash flow, and your assets is one of the surest ways to spot any anomalies or drains on your profit, as well as to make important predictions for the coming financial year. This in turn can help attract investors and business partners, and can help you to restructure your finance and spending to ensure you increase your profits and keep your overheads to a minimum. It can also help you know how much you can invest and how much you can afford to spend.

Cutting overheads is an important step towards solving and preventing insolvency and greatly increasing your profit margin; and you might be surprised at the various ways you could be spending unnecessary money that could otherwise be used to pay off debt or buy assets. Look into your records (and make sure you keep detailed records in the first place) and examine places where you can cut back. You might have to let go of some members of staff if you find you’re paying more for them than you’re getting back, or if you can combine job roles to cut down your list of employees to pay. Similarly you might be able to spend less by moving into a smaller building. There are many third party consultancy companies specialising in the restructuring of companies and beating insolvency that can take a hard look at your books and help you to come up with some solutions.

Furthermore from a legal standpoint keeping a complete record of all of your earnings is a legal imperative so that you can display them when asked. The other good news is that an accountant and bookkeeping service can help you to keep a tally on all the money you invest back into your business – money spent on petrol, or meals entertaining guests, or stationary – and all this can then be claimed back on tax. In this way then an accounting service or bookkeeper should pay for themselves.

Keeping a close eye on how much profit you earn, and where precisely it’s coming from, can also be a good way to get a kind of ‘feedback’ and let you know what’s working and what isn’t. For example if you start a new marketing campaign you can immediately find out how much it’s costing you and how much new revenue is coming in – almost like market research but free.

Then at the end of your business’ life, when it comes to that time where you’re ready to sell your company to someone else and move on – book keeping and accounting will be necessary for accurate business valuation to make sure that both you and the buyer get a good deal.

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