Are you looking for accounting services in Denver? Keeping track of your finances is an important part of running a successful small business. That’s why it’s critical that your financial information is up-to-date and accurate, so you have the information you need to make informed business decisions and maintain a healthy cash flow.
It can be difficult to keep track of your finances alone as your business expands and additional customers, vendors and employees are added.
If you can no longer handle your small business’s bookkeeping and accounting on your own, it’s time to get assistance. But do you need the services of a bookkeeper or an accountant? The terms are often used interchangeably, and their duties may overlap to some extent, but there are important differences.
Here’s everything you need to know to find out which is ideal for you.
Bookkeeping vs. accounting
Bookkeeping: bookkeeping is the part of accounting that records and stores a business’s financial data (including daily transactions) in a database. Bookkeepers are not required to be licensed, but they can become certified. The certifications or licenses required are usually based on the location of the individual or the individual’s employer.
Accounting: accounting is the practice of documenting, summarizing, analyzing, advising, and reporting on the financial data of a business. A qualified accountant is usually responsible for bookkeeping (CPA).
What does an accountant do?
He or she manages accounts on a daily basis:
An accountant can keep track of all the transactions in your company’s finances on a daily basis. It’s much easier for him to manage your cash flow if you note every sale or transaction and use software to do so.
Keeps records up to date:
An accounting firm or bookkeeper will make sure that all the records of your business are kept up to date. In addition, it is their job to point out any discrepancies between your company’s books and finances and make sure the issues are resolved as soon as possible.
Keep up to date on the law:
Taxation can be a tricky subject. Even a single mistake can result in you receiving a threatening letter from HMRC. This is where accountants come in, and they can help you ensure that your business is in compliance with all applicable regulations.
Keep your books tax-ready:
Tax deadlines are pretty strict, as are laws and regulations. Since bookkeeping is rarely a priority for many small businesses, deadlines can easily fall behind. An accountant makes sure your records are accurate so you’re always prepared for tax, which pleases the IRS and prevents you from having to pay more fines.
Takes care of banking business:
At the most basic level, accountants monitor transactions that are entered into software, such as an app. Bank feeds that connect the program to your company’s bank account allow you to track each transaction in real time.
What does an accountant do?
He looks at the profits and losses of your business:
An accountant performs a detailed analysis of your company’s profits and losses and submits the reports to the appropriate management.
Dealing with auditors.
Accountants manage your company’s audits and keep the necessary records to submit to the auditor.
Reviews your budget:
Accountants are responsible for reviewing your budget annually and making sure you don’t run out of funds. They review your company’s expenses.
Since a minor change in financial values can affect all records, accountants carefully preserve and enter your data into the system.
They recommend appropriate accounting software:
Accountants know the new and old software in the market. Consequently. They can recommend the most suitable accounting software according to the size, type and industry of your business.
Virtual accounting vs. traditional accounting
There are many differences between traditional accounting and virtual accounting.
Virtual bookkeeping: virtual bookkeepers, like traditional on-site bookkeepers, handle day-to-day financial tasks such as documenting transactions, reconciling bank and credit card accounts, and processing payroll. The main difference is that a traditional accountant must be physically present at your workplace to perform these activities, while a virtual accountant does everything remotely using cloud-based software. Remote or online bookkeeping are other names for virtual bookkeeping. As with any person or service you’re considering to handle your company’s funds, you should ensure that the person’s work is reliable, accurate, timely and complete.
Traditional Accounting: Traditional accounting, which is similar to the outsourcing model, uses a “write-up” method to meet accounting requirements. In the past, when a new, groundbreaking product or service was introduced, most people were skeptical and preferred to take a conservative approach. Change has never been easy to accept. IBN Technologies Limited changed this paradigm for several of its clients by taking a flexible approach and offering different solutions that the client was not familiar with, but that were incredibly time and cost efficient.
When do you need an accountant?
You need an accountant if you fall into one of the categories mentioned:
When categorizing your transactions is too time consuming and you can’t focus on other business aspects.
- You can’t keep up with accounts receivable.
- You are not good at handling paperwork.
- You can’t keep up with sending out invoices.
- You keep more accounts than necessary.
- They can’t calculate expenses and profits.
- You spend more than 5 hours a month on accounting services in Melbourne.
When do you need an accountant?
- You probably need an accountant if you fall into the following category.
- If you are not familiar with accounting software available on the market.
- When accounting tasks are too time-consuming and you are unable to devote time to other important studies.
- You do not know how to file an income tax return.
- If you can afford to hire an accountant.
- If you do not hire an accountant, you may suffer long-term losses.
- If you cannot avoid an audit yourself.
- You are unable to make financial decisions in real time.
- If the process of planning for the future is hindered.
Why are accountants and accounts necessary for your business?
Now that we have discussed all the points necessary to understand bookkeeping and accounts, let’s discuss why your business needs one of each.
● It helps you stay on budget
When your income and expenses are well organized, budgeting becomes much easier and you can better estimate your financial resources and costs.
A budget serves as a financial plan for your business. With a budget, you can prepare for future business expenses to support development. If you don’t keep accurate and up-to-date books, it’s much more difficult to create a proper budget because it’s all guesswork.
● Here’s how to stay on top of your taxes throughout the year
Businesses must file their taxes at the end of the fiscal year, no matter how inconvenient that may be. If you use an accounting method, you’ll have your finances ready for tax season, and the IRS won’t be breathing down your neck.
When HMRC requests financial statements from your business for tax purposes, having thorough balances over a longer period of time allows you to more accurately predict the outcome.
● Organize your reports
Last-minute stress over finding an important business document can cause deadlines to be missed and small errors to creep in. Businesses of all sizes can’t afford to make mistakes, and keeping regular records can help.
If you keep your books regularly, stay on top of things, and don’t wait until the last minute, you’ll be able to keep orderly records. Over time, it will become much easier to find the information you need on the fly.
● Software skills
How do you keep track of your finances when it comes to bookkeeping? The good news is that more than half of small businesses use accounting software. QuickBooks is the most widely used software, with more than three-quarters of small businesses using it.
Some small businesses use cloud-based software. However, one-third use software that doesn’t require an Internet connection (i.e., computer-based), which has certain drawbacks.
● It helps you create better business plans
Every business wants to grow, but poor financial records can prevent that from happening as quickly as you’d like. It’s difficult to set growth goals if you don’t have accurate numbers or data to analyze.
Plus, you’ll be upset that you didn’t meet the goals you set for yourself because you’re just estimating everything. When you have a handle on your books and keep consistent financial records, you can better plan your business goals and drive development.
● Improves cash flow
By hiring a qualified accountant, you can ensure that you have proper credit control and cash management procedures in place that allow you to access all potential finances and information. Effective cash management refers to the way a company manages its operating or business activities, financial investments and financing activities to maintain positive cash flow. To exist, a company must generate sufficient cash flow from its operations to cover its expenses, compensate investors, and develop the business. In addition to generating revenue from its operations, a company must manage its cash so that it has sufficient cash to meet its immediate and long-term needs.
● Sustainable growth
A growing business has numerous requirements, to name a few: Controlling capital needs, hiring the right staff, managing cash flow, strengthening customer relationships, etc. An accountant will help you manage your business by advising you on improving processes, taking care of your financial and tax obligations, and introducing you to tools that will help you save time while reducing costs.
Their knowledge will be helpful in finding funding opportunities and designing incentive systems for staff. As tempting as the term “expansion” may be, it also carries a number of hurdles. Unexpected growth can be as troublesome as slow growth and can lead to a number of issues, including cash flow, taxes, staffing and office space. A qualified accountant can help you respond quickly and successfully to unanticipated growth and turn it into what it should be: a benefit.
Do you believe that accounting is the most pressing aspect of a business that directly drives its development? Acounting tracks and maintains the totality of your business, which is fundamental to the perception of your market position. It also helps you settle on the indispensable decisions that will finally make your business flourish.
This article has been about whether your business needs an accountant or a bookkeeper and why? We explained the differences between bookkeeping and accounting. Later, we explained what their responsibilities are and how they differ. You can see when you need an accountant from the section “When do you need an accountant” and “When do you need an account”. This section explains the situations in which you need to consider an accountant, depending on your needs. You can also find the differences between a virtual accountant and a traditional accountant. Finally, we have discussed why you need one of them and the benefits they can offer you.