What is the Difference Between Bookkeeping and Record-Keeping?

Bookkeeping and Record-Keeping

One of the most common questions asked by small business owners today is whether they should hire bookkeeping and record-keeping themselves. Both are necessary for the running of a small business, but each has its advantages and disadvantages. Many small business owners mistakenly believe that bookkeeping is a more reliable source of accounting data and therefore should be chosen over record keeping. However, this is not the case.

Online Bookkeepers

Online bookkeepers provide very accurate information and because all of the work is done off-site. There is less chance for human error than with traditional bookkeepers. In addition, many small business owners who are leery of new technology often feel more comfortable with an online bookkeeper than with local bookkeepers. Bookkeepers can be more expensive to hire per hour than online bookkeepers, however since they must purchase equipment and software, the fees may be worth it depending on your growing business.

Bookkeeping

Accounting for Small Business

Small business accounting is less complex than regular bookkeeping. There are a number of ways to reduce the cost of online bookkeeping, such as making the bookkeepers’ computer the primary machine used in the business. This allows the accountants to enter the information directly into the computer, and it eliminates the need for entering the information through a paper file. In some cases, an accountant can use a terminal or computer designed for bookkeeping to enter and update data remotely. Most professional bookkeepers offer remote access services, which allow them to update accounts on the fly without having to be in front of the computer. Most small businesses will find that in most cases, the added benefit of remote access is well worth the extra money.

Accountant Must have Great Skills in Completing 

While many bookkeepers provide online bookkeeping services, it is important to choose an experienced bookkeeper with excellent technical skills. Online bookkeepers are not considered professionals. The accountant must have great skills in completing invoices, balancing checks, and other core accounting responsibilities. Accountants with this skill set are usually paid more than entry-level bookkeepers. For most accounting firms, a competent bookkeeper is essential to maintaining the integrity of their books.

Bookkeeping

Small Business Owners 

The number one advantage of a bookkeeping service is the ability to save money. Small business owners cannot afford to hire full-time bookkeepers and even with experienced bookkeepers, small businesses can typically save up to 80% of what a regular bookkeeper would charge. Online bookkeeping has become more popular, and more accounting firms are offering online services to their clients.

Record Keeping 

Record keeping is required whenever a company receives cash, pays someone, or sells goods. While most businesses have separate files for sales, purchases, receipts, and so on, they all need records to track transactions. Bookkeepers will create records for these different types of transactions and keep them in chronological order. In small businesses, this can be a very time-consuming task; therefore, the savings that a bookkeeping service can provide is invaluable.

Bookkeeping and Accounting

When it comes to paying taxes, both bookkeeping and record-keeping are required. Most small business owners will not do their own taxes, and small business owners can be subject to audit by the Internal Revenue Service. This audit can make a huge impact on the bottom line. By using bookkeeping services, small business owners can save hundreds of dollars a year in taxes because they won’t have to hire a tax professional to do their taxes. If an audit comes to fruition, however, the bookkeeper can still provide the accounting for the small business. Audits generally aren’t too bothersome because most small businesses have staff members that are well educated in keeping track of financial records.

Conclusion

While bookkeeping is primarily a function of accounting, some bookkeepers are trained to perform other functions as well. For example, some bookkeepers help with payroll, data entry, bank reconciliation, and printing. Some bookkeepers work exclusively with small businesses, while others work for larger accounting firms. Regardless of which function you may use, both bookkeeping and accounting can be a useful part of running a small business.

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