Bookkeeping vs. Accounting: Knowing When to Hire Expert Help

Small businesses in Bloomfield often find maintaining, managing, and organizing financial records challenging. Records like financial transactions, sales reports, expenses, assets, liabilities, etc., are vital when creating reports like balance sheets, income statements, cash flow statements, etc.

Therefore, hiring a Bloomfield, MI accountant can benefit small businesses in the area. They can provide a wide assortment of services that can prove very beneficial for your business.

Understanding the key difference between accounting and bookkeeping

Small business owners often think hiring a bookkeeper will solve their accounting problems. However, that’s not the case. While a bookkeeper can maintain and record your business’s financial transactions, an accountant can also analyze, interpret, and communicate your business’s financial information.

Moreover, an accountant can also help you with tax planning, financial statement preparation, auditing, and much more. 

The process of setting up an accounting system for a small business

Depending on the business’s size, status, and complexity, you have to instill an accounting system for your business. If you don’t know how to do it, you can always seek help from your accountant. Nonetheless, here’s how to set up an accounting system:

• Establish a legal structure for your business, such as a sole proprietorship, partnership, limited liability company, or corporation.
• Open a business bank account and choose between cash-based and accrual-based accounting methods. Cash basis accounting is when you record only cash transactions, while in accrual basis accounting, you keep a record of the revenues irrespective of whether cash changes hands or not.
• Use software to track your business expenses, such as payroll, office supplies and equipment, professional fees, transportation, advertising, and marketing.
• Establish a bookkeeping system, choose the methods for accepting payments, and set up a payroll system.
• Use accounting software to help you calculate margins and taxes so that you comply with local, state, and federal tax laws.

How to tell if a small business needs an accountant

While an accountant can be very beneficial for small businesses, the owners must understand when they need the services of an accountant. Nonetheless, you can look for the following signs that can tell you that your business needs an accountant:

• When your business expands, your finances become more complex. So, if your business is growing, hiring an accountant to keep track of expenses, incomes, payroll, taxes, audits, etc., can be a good idea.
• Investing in areas such as hiring a designer or marketing manager, purchasing software, or outsourcing services may require expert financial opinions, which professionals like accountants can provide.
• Applying for debt, creating complicated financial reports, and managing assets, liabilities, shareholders’ equity, expenses, cash flow, etc., are also some tasks that may require the expertise of an accountant.