By Satish Patel
In a small business, the terms accounting and bookkeeping may be used interchangeably; but each of them has well-defined functions. A well-maintained bookkeeping system is a necessity for the accounting system to function properly, which in turn supports the smooth functioning of the business offerings and its deliverables.
The range of functions that falls under bookkeeping is vast. It must be mentioned here that if you’re looking for an efficient accounting system, a business must perform certain functions on a daily basis. The foremost among these being recording income and tracking expense. These are entries that the accounting system will build up on, for tracking finances as well as for tax reporting.
An ideal bookkeeping system includes the following tasks:
– Keeping track of all financial transactions of the company such a purchases, sales, payments made, and payments received
– Recording income, cash outflow, and bank transactions of the company
– Reconciling bank accounts, keep track of deposits in the account, writing check, and keeping banking reports updated
– Preparing and maintaining reports such as the income statement and the company’s balance sheet
These records, collectively, provide the basis for sound accounting processes in the company. More importantly, the bookkeeper’s work allows the accountant to prepare reports for declaring income and filing taxes with the government.
In a small business, resources are limited; it is possible that the business owner or partners themselves function as bookkeepers and accountants as well. A significant disadvantage with this system of accounting and bookkeeping is that because owners and partners are also concerned with managing client deliverables and ensuring sustenance for the business, they may not be able to ensure 100% accuracy in record-keeping at all times.
A viable option for small businesses or companies with limited resources is outsourcing. Locating a trustworthy vendor or accounting and bookkeeping services provider can go a long way in ensuring:
– Accuracy in accounts
– Accurate reports for tax purposes, and
– Less chances of monetary losses as a result of a recording lapse.
Outsourcing saves a huge amount of money that would otherwise go into setting up and maintaining an entire department, complete with infrastructure and manpower. More importantly, depending on your needs, a vendor will ensure high-quality work on time.
Interested in learning more about accounting and bookkeeping outsourcing? Ever outsourced your support functions previously? Share your experience with us, we would love to hear from you.
Satish Patel, CPA
President, Analytix Solutions
Satish Patel, Founder-CEO of Analytix Solutions, has more than two decades of experience as a CPA. He has also advised small and mid-sized businesses on diverse matters such as valuation, accounting, and finance. His experience extends to raising capital and arranging for finance from angel investors.