Most people find it difficult to distinguish between book-keeping and accounting when considering the differences between the two processes. Although their objectives are similar, bookkeepers and accountants assist your company at distinct phases of the financial cycle.

To make a short story shorter, bookkeeping is administrative and involves records whileaccounting uses bookkeeper data to provide businesses and households the analytical data about financial health.

Bookkeepers versus Accountants

We’ll go over the functional distinctions between bookkeeping and accounting in this guide, along with the variations in the responsibilities of bookkeepers and accountants.

  • The Essence of Book-Keeping: Book-keeping is more administrative in nature and involves precisely documenting financial transactions. Bookkeepers are also all about recording your finances while accountants figure out if you’re spending more than you earn.
  • The Essence of Accounting: Accounting is more analytical and uses book-keeping data to provide you with strategic insights into the financial health of your company.Businesses tend to hire accountants to see if they’re in a good and financially healthy place.
  • Recording and Keeping Tabs: The process of consistently recording daily transactions is known as book-keeping, and it is essential to obtaining the financial data required to manage a profitable business.
  • General Ledger Upkeep: Keeping up a general ledger is one of book-keeping’s primary duties. A bookkeeper uses the general ledger—a simple document—to enter or “post” the amounts from sales and expense receipts.
  • Record-Taking vs. Financial Models: Bookkeepers keep track of financial transactions, record credits and debits, and create invoices or receipts. Meanwhile, accounting is a high-level process that creates financial models using financial data gathered by the bookkeeper.
  • Shouldn’t The Owner Handle Records? Startups and small businesses tend to double as their own bookkeepers to save costs or they simply can’t afford such services. However, it pays to have book-keeping services for medium-sized to big businesses who could afford them.
  • Historical Accounts and Financial Statements: The professional bookkeeper is also responsible for preparing your financial statement that includes the balance sheet, cash flow statement, and income statement as well as balancing historical records, ledgers, and subsidiaries.

The book-keeping process is primarily transactional, whereas the accounting process is more subjective and analytical. They’re responsible for interpreting the gathered data to gauge the spending habits or profitability of companies.

To Sum Everything Up

Although the two may appear to be fairly similar at first, there are a few key distinctions. The main goals of book-keeping are to organize and record financial data. Accounting is the process of analyzing and presenting that book-keeping data to investors and business owners.

A book-keeping system’s complexity is frequently influenced by the size of the company and the volume of daily, weekly, and monthly transactions. Your company must keep a ledger of all sales and purchases, and some transactions require supporting documentation.

it’s a big fact that the HR departments play a big role in shaping a business or company workplace. Yet, the question arises – does every business truly need an HR department? Learn about the need for a human resources department, especially in terms of business sizes and models.

The Role of HR in Modern Businesses

First of all, HR professionals don’t just hire and fire as most people shallowly know. They are highly important in strategic planning, employee development, and compliance with labor laws. Other than that, they also tend to foster a positive work culture. This positions the said department as some sort of a “bridge” between management and the workforce.

Size Matters: The Business Scale and HR Needs

  • Small Businesses and the HR Function

In small businesses, the need for a dedicated HR department can be debatable. For one, HR duties might just be managed by the business owner or staff member. The intimacy of small teams allows for more direct handling of HR-related matters. For that, it can already lessen the need for a specialized department to do so.

  • Scaling Up: The Growing Need for HR

As businesses grow, operations and workforce diversity increase. In this case, having an HR department or outsourcing HR functions is highly needed. A dedicated team or service can manage various tasks related to human resources – from adhering to labor laws to addressing the needs of the workforce.

Some Alternatives to HR Departments

  • Outsourcing HR Functions

Outsourcing allows companies to benefit from expert HR services – all without maintaining an in-house department. Outsourced HR can be beneficial for medium-sized businesses that still lack the needed resources for a full-fledged HR department.

  • Technology and HR Management

Popular HR software solutions can effectively automate many routine HR tasks. These include common tasks such as payroll processing, benefits administration, and even recruitment and onboarding. By using this type of technology, companies and businesses can maintain more systematic operations while still addressing the most needed HR needs.

  • The Argument for Flexibility

In the end, the growing nature of work is often highlighted by today’s trends. These include the now-popular remote work and the gig economy. This calls for a reevaluation of the usual business functions including HR. For that, flexibility becomes more of a need as businesses have a hard time managing teams and adapting to market changes.

For that matter, the role of HR may be less about conforming to a rigid structure of the workplace. It is actually more about applying HR functions in every part of the said workplace – which can be done in a way that suits the business’s needs and goals perfectly.

A startup business is a major investment. The previous statement is also an understatement. You will sacrifice a lot or at least spend a lot of capital to get your business off the ground, and more often than not, startups end up failing or going bankrupt due to the competition.

The Absolute Necessities When Starting Your Own Business

Here are the things you need when starting a business.

  • Research Isn’t Just for Scientists! Learning how to start your own business involves in-depth market research. Without prior knowledge like that, you’ll be spending your money doing trial and error on what works and what doesn’t. It can be quite the expensive lesson.
  • Get Investors for Your Startup: It’s probably best to get investors that you strictly have a business partnership with so that every decision is done in a strictly business sort of deal. Many friendships have ended and families have become broken due to cut-throat world of running a company.
  • Craft a Business Plan: Your business plan should involve having a product to sell, knowing how to market it to your clientele, and building up your brand enough to get a following of customers who’ll serve as your foundational consumer base.
  • Know Thy Competitors as You Know Thyself: Just as Sun Tzu advised, you should know your “enemies” or direct competitors as you know yourself. This way, you can know your limits and their limits. Know what you can or can’t get away with them. Find what’s lacking from them and fill that untapped need.
  • Believe in Your Product: Some businessmen wish to ride fads and get-rich-quick schemes instead of investing their time and effort into a product they believe in. Having the confidence of a working product will make marketing it a breeze.
  • Marketing can Make or Break a Product: Even worthwhile products can be ruined by bad marketing (although no amount of marketing can save a bad product in the long term). Learn what your product can offer your customer so that it can sell itself to them.
  • Demographics and Sustainability: Even if you’re being backed by a billionaire father, your business will not grow beyond being a pet project of a trust-fund baby with cash to burn  until you realize what your demographics are and how to best sell them your product and/or services. At the very least, find a sustainable niche market.

Building Solid Foundations for Your Startup Company

To ensure you’re stepping in the right direction so that you can avoid having things go awry from the start or down the line, you need to build the foundations of a solid startup business. To run a successful business also requires adaptability.

A profit-and-loss or profit and loss statement helps inform you, the business owner, and your business’s stakeholders how healthy or underperforming your business is, which might require course correction or maintaining the current course towards profitability.

You can use accounting programs like Peachtree and QuickBooks to make it relatively easy to do things like produce a profit-and-loss statement for your company. They can specifically generate the statement for you. Just provide the pertinent info.

Profit-and-Loss Statement 101

If you wish to create a profit and loss statement for your business using an Excel spreadsheet or by hand, do the following. You’ll see it’s so easy an elementary student can calculate it.

  • Track Your Operating Revenue: Accurately and regularly record all payments received in regards to your sales of goods and services, including incoming revenue, for posterity. Don’t miss out on one sale and keep your books honest.
  • Record Cost of Sales: Cost of sales or goods sold refers to fluctuating expenditures, such as raw materials and inventory instead of fixed costs like leases and payroll. This can also include income tax.
  • Calculate Gross Profit: Get the total revenue for the month and subtract the cost of sales from it to calculate gross profit for the month. Add the months to get gross profits for the quarter and the year.
  • Determine Your Overhead: By overhead, we mean expenses like insurance, utility expenses, equipment rentals, advertising costs, lease payments, and  other fixed expenses (as opposed to cost of sales).
  • Sum Up Your Operating Income: As for your operating income, just get your gross profit (for the month, quarter, or year) from your overhead or fixed expenses. Yes, you need to calculate sales first before subtracting utility expenditures.
  • Consider Other Expenses and Income: Think about things like income not directly related to the offerings of your business, such as company investments paying dividends. As for expenses, this includes tax payments from pre-tax income, finance charges, or loan interest.
  • Get Your Net Profit: Calculate your net profit by taking account of everything above then subtract your other income and expenses from your operating income. No, your extra income shouldn’t be included in the net profit when gauging your business’s standalone stability.

Verdict

It’s easy to make profit-and-loss statements. It only involves basic arithmetic. The complexity of calculating it will depend on how many individual elements like operating revenue, cost of sales, overhead, and so forth are accurately recorded.

Some apps can even automate the entire process, while small business owners can calculate it from scratch using Excel or similar bookkeeping programs when in a pinch. It gives you amazing insight on company health and sustainability of your business.