Professional Accounting and Bookkeeping Services provider | ChoksiTax

Professional Accounting/Bookkeeping Services

Terminologies can be confusing at times and one such terminology which confuses the majority of the business owners is a bookkeeper or an accountant. Business owners have the impression that since their functions are almost the same,they portray the same meaning.

But some minor differences need to be understood before hiring them.

In this blog, we will discuss:  The similarities and differences betweena bookkeeper and an accountant.  Does your company need an accountant or a bookkeeper? How to find out?  Implications of wrong accounting and its impact on business

Let’s commence with the definitions.

 Bookkeeping: Bookkeeping is a process in which all the financial transactions of a company are recorded daily in the accounting books. It includes combining the source documents for each transaction and other operations of the business and storing the same in the company’s database.

Bookkeeping is the basefor accounting. There are no compulsions on a bookkeeper to have a license but they can acquire certification or license if needed.

 Accounting: The process of recording the financial transactions of a business is termed accounting. Accounting or accountancy as you name it includes multiple tasks like summarizing, analyzing, recording, consulting, and in the end reporting it to the Income-tax department.

In short, accounting is a summary of financial transactions and cash flows of the company which are reflected in the financial statements.

All these accounting tasks are done with a professional Chartered Accountant (CA).

 Similarities between Bookkeeping & Accounting: Both bookkeeping and accounting involve finances and bookkeepers and accountants take care of financial data.

Both these professionals have basic accounting knowledge and are pivotal for your business.

 Bookkeeping vs Accounting: Where bookkeeping ends, accounting begins. Though the tasks of both bookkeepers and accountants overlap each other, bookkeeping is a small part of the accounting process.

Some basic differences of both these processes are:

1. Definition: Bookkeeping is an administrative role carried out by a bookkeeper who records all the purchases, sales,and other financial transactions of your business occurring daily.

Accounting on the other hand is a subjective role carried out by an accountant whosummarizes and analysesthe bookkeeper’stransactions, makes reports, and provides financialguidance for your business growth.

2. License: A bookkeeper doesn’t have to have a certified license.

An accountant must have proper certification from ICAI (Institute of Chartered Accountantsof India), i.e. a Chartered Accountant (CA) degree is essential.

3. Functions: The basic financial and accounting transactions are handled by the bookkeeper.

ACA is utilized for advanced accounting tasks and crucial financial decisions.

4. Duties: A bookkeeper records the daily financial transactions of a company like sales, bills paid, payrolls, etc. Their motto is based on the accuracy of bookkeeping rather than data analytics.

Their tasks include:     

Recording of financial transactions Posting debit and credit entries Generating invoices Controlling payroll Maintaining ledgers, accounts, and subsidiaries

An accountant analysis the data based on the details provided by the bookkeeper. Their tasks include:     

Reviewing the financial statements made by the bookkeeper Analyzing this data Converting this data into appropriate reports Giving updates on regulatory compliances of the government Sharing advice when required based on these reports and helping in managing the finances of the company

The bookkeeper’s records will help the accountant in analyzing the finances of a business and in giving appropriate advice regarding the same.

5. Motto: Bookkeeping is designed to generate data based on the financial activities of the organization.

Accounting is designed to convert this data into reports for knowing the financial status for making appropriate business decisions.

 Bookkeeper or Accountant? Which do you need?

Now that the differences between these two terms have provided you some clarity, choose which one is required for your business. This choice varies from industry to industry as well as the expertise level required for handling the finances.

Though hiring a bookkeeper is cheap as compared to an accountant and an ideal choice for handling business transactions daily, the choice depends on the size of your business. If your business is widespread and requires professional insight into the handling of finances, you may as well hire an accountant for the same.

A few questions which may help you indecidingwho is needed for your business are:  Which type of business do you have?  How many employees do you have?  How much is the cost of inventory?

Few signsthat indicate your business needs an accountant.      

The rapid growth of your business boost in revenue, but lack of increase in profit Expansion outside state boundaries Need to make large investments Need guidance for unmanageable complex taxes Time is consumed in accounting rather than that on business growth  Need professional financial reports and advice  Need for audits

So, some industries may need to monitor their finances daily as well as need financial advice and hence they may need both, a bookkeeper as well as an accountant.

You must hire a qualified accountant who can guide you with your finances at all stages of your business.

If your business is newly developed, you may need a bookkeeper to handle the finances, but when your business grows, you may have to shift your need from getting a bookkeeper to hiring an accountant.

You just need to focus on when the switch over is needed.

Many firms hire unqualified bookkeepers or accountants which are available at cheap rates. This puts their business and finances at a huge risk. Let’s find out.

 Risks of Hiring an Unqualified Accountant:

There are no stringent laws that take action on individuals calling themselves accountants. Hence there are many individuals with the title of accountantsroaming in the market. They may lack the necessary qualifications and hence, hiring such non-qualified accountants though cheap is a threat to your business.

 Costs of a Bad Hire: An unqualified accountant may prove to be a costly affair for your business, since it may not give the desired results.

Few wasted costs of a bad hire are:    

Waste of expense incurred in hiring Waste of salary since no productivity is gained The training cost is wasted Cost of replacement to be incurred

 Effects of a Bad Hire on your Business: Unqualified accountants may affect your business in multiple ways.

The entire accounting process may function in the wrong way and the consequences can be unimaginable.

A few adverse effects of a wrong hire are:     

Poor quality work which affects business Business reputation is affected The goodwill of the business is at stake It creates unsatisfied clients Waste of time and money

Such unqualified accountants not only disrupt the organization’s environment but also affect the productivity of work, not to mention the wastage of time and money.

To ensure that such unqualified accountants are not hired by mistake, your recruitment team must be briefed about the qualifications required for hiring these personnel.

 Implications of Wrong Accounting: Be it minor or major accounting errors, the consequences are grave.

Incorrect income/expense reporting is a crime as per the Income-tax department and you may end up paying more taxes (finances) in the form of penalties.

Even inaccurate financial reports can cause bad investment decisionsand land your business in trouble.

A few more consequences of wrong accounting are:  The finance team may later have to spend a lot of time reconciling these errors.  Wrong accounting impacts decision-making related to budgeting and finances.  Underestimated profits reduce the value of your company, whereas exaggerated profits may lead to high tax payments.  When auditors find this inaccuracy in financial accounting, the company may suffer a financial setback or its survival may be at stake too, apart from payment of heavy tax penalties.

Solution: Make sure to hire professionals for handling your finances, because it saves you time, money, and a headache while handling taxes.

Why don’t you approach ChoksiTax for the handling of your accounting and Bookkeeping Services?

They have qualified and experienced accounting experts who can resolve all the above-mentioned issues and save your company from getting doomed by an unqualified accountant.

Their professional accounting services provider team is well updated about the tax laws and can help you in efficient tax compliances.

Not only do they handle routine accounting, but their efficiency in handling GST returns, online filing of TDS returns, audit checks, etc. is commendable.

Their financial experts can help you in tax planning and handling of finances, thus taking a major task off your shoulders in a very professional way.

So, what are you waiting for? Go ahead, approach Choksi Tax Services, which is a one-stop destination for all your accounting and compliance needs.