The business is thriving and that's exciting. When you have more customers, more money, more employees and new opportunities, it means it's going in the right direction. However, a challenge that many business owners may overlook is the growth challenge of maintaining a well-organised set of finances.

If the business is small, a business owner could possibly handle their invoices, receipts, bank transactions and basic financial records themselves. When the business grows, however, financial responsibilities get more complex and consume more time. Where bookkeeping and accounting differ is here.

The two words are sometimes used often interchangeably, but bookkeeping and accounting are two different things. Procentax Finance is more concerned with keeping a proper financial record, and accounting is about using the financial record to produce useful and compliant financial information for compliance, planning and decision making.

What Is Bookkeeping?

A good bookkeeping system is the core of any business's financial management.

A bookkeeper usually handles day-to-day financial transactions and keeps records and organizes financial data. Items can be sales, purchases, expenses, invoices, payments and bank transactions. Regular bank recon and accurate bookkeeping software records are also common bookkeeping tasks.

Some of the most common bookkeeping tasks are:

• Keeping a record of income and expenditure

• Making bank and credit card balances balance

• The management of accounts payable and receivable.

• Processing payroll-related records

• Maintaining accounting software

• Preparing financial information for reporting

• Managing finances in an orderly manner.

What Is Accounting?

Financial information goes on to be accounted for. Bookkeeping involves simply making an entry detailing what has occurred, whereas accounting involves the interpretation, analysis and reporting of what has happened. Depending on qualifications and registration, accountants can help to prepare financial statements, help with tax compliance, financial analysis, and business structures and planning.

Some questions that accounting can assist with are:

• Is there real profit to be made in the business?

• What are the principal sources of income?

• What are you spending more on?

• What are the tax liabilities that should be taken into account?

• What is the overall performance of the business compared to previous periods?

• What kind of information should a business get before it makes a big decision?

Essentially, bookkeeping provides accurate financial information, and accounting provides business owners with insight into what the numbers mean.

Bookkeeping vs. Accounting: What's the Difference?

The easiest way to explain the difference is to consider the two actions of recording and interpreting.

Both functions are not redundant on each other. Indeed, bookkeeping is the key to accurate accounting. Reports and decisions relying on the underlying financial records may also be impacted when those underlying records are incomplete or unreliable.

Why Do Growing Businesses Often Need Both?

As a company gets bigger, over time it becomes more complex. Suppose a company began with a single entrepreneur and a few clients. The owner may only have a couple dozen monthly transactions. Then the same business may have several employees, hundreds of customers, several suppliers, recurring subscriptions, loans, assets and many more transactions and much higher payroll obligations after two years.

It's easy to get overwhelmed by all this on your own. That's where bookkeeping and accounting help comes in handy. Good bookkeeping ensures that finances are kept in order and up to date. That can then make it easier for accounting support to create reports, help with compliance and give a better view of the financial position of the company.

When Should You Consider Outsourced Bookkeeping?

Outsourced Bookkeeping Australia can prove especially beneficial when business owners are spending more time on administrative tasks of financial matters.

No one can tell you what the magic number is for when outsourced bookkeeping services are needed. Rather, focus on what's taking place in the business.

You may want to consider external support when:

• Financial records are often out-of-date.

• There is not consistent completion of bank reconciliations.

• Invoices or bills are not being received.

• The owner is devoting hours each week to bookkeeping duties.

• Financial information is hard to comprehend

• The volume of transactions is rising

• You're ready for growth.

• You don't have an internal bookkeeping staff.

By outsourcing, business owners and employees can spend more time with customers, operations and growth, and experienced professionals can work with them on routine financial activities.

When Does Your Business Need Accounting Support?

While bookkeeping may not offer everything a growing business requires, it is an essential part of the equation. Support in accounting can be more important as financial decisions grow in weight. This may encompass financial reporting, tax-related matters, compliance assistance, planning and analysis. For instance, if a business owner is thinking about relocating their business, they may want to look for more than just a list of transactions. They might wish to learn the costs associated with extra rent, staff, machinery and running expenses.

Also, when a business is considering acquiring another business, getting into a significant amount of debt or a major re-structuring of the business, reliable financial information is especially critical. That's where Procentax Finance can offer a viable solution for companies looking to access professional accounting solutions without having to establish a massive accounting team.

What About Accounting Outsourcing?

Accounting outsourcing goes beyond the point of outsourcing transactions. Accounting Outsourcing Australia lets businesses send out a specific part of the business finance process or a much larger part of the financial process to an external group. This can range from bookkeeping, financial reporting, accounts payable and receivable, accounting administration and other back-office services, depending on the company and its needs.

The first is flexibility. If a business is expanding, it may not necessarily require a full-time finance team right now. However, it might require more reliable assistance for some hours or particular functions weekly. As the business grows, the level of support can potentially increase with it.

Bookkeeper, Accountant or Virtual CFO?

These roles can be considered as multiple levels of financial resources instead of competing services.

A bookkeeper's job is to ensure that the bookkeeping system is up and running.

Financial information is used by an accountant to report, comply with, analyze, and perform accounting-related tasks.

The Virtual CFO is more concerned with strategy, forecasting, financial planning and assisting management to make business decisions.

A trivial illustration may be:

Bookkeeper:

“These are the transactions and financial records.”

Accountant:

“This is what those numbers represent and what reporting and compliance implications they carry.

Virtual CFO:

“Given the figures, this is the financial aspect of your next decision.

The specific duties and responsibilities of each role will vary depending on the provider, their qualifications and the needs of the business, as well as the regulations applying to them in Australia.

Signs Your Business Is Outgrowing DIY Bookkeeping

A lot of business proprietors still take care of financial management themselves due to the fact that it succeeded in the early years.

The issue is that if it worked for 30 transactions per month, may it work for 300 or 3,000?

Some warning signs are:

1.You are always catching up.

When bookkeeping is always delayed for the weekend or until the end of the month, you may not be keeping up on your finances.

 2.You don't have the current numbers.

Without being able to identify the revenue and expenses, outstanding invoices or cash position at any given moment, decision making becomes challenging.

3.If that's the case, your financial administration is dragging you away from growth.

Business owners should spend time developing their business, serving customers and leading their teams. It may not be best to fix your spreadsheets for hours each week.

4. Your Business is now more complicated.

Financial management can become more complex due to the addition of employees, various sites, stock, loans, and growing number of transactions.

5. You're taking bigger financial risks

Sometimes, expansion, hiring, large amounts of purchases, and new investments demands more in-depth financial analysis and is beyond the scope of simple bookkeeping.

How Outsourcing Can Support Business Growth?

Businesses look at the outsourcing option because they can get help from experts without having to hire all of the functions within the company.

PROCENTAX offers, for instance, Virtual CFO services, accounting outsourcing, and bookkeeping, solutions of which are scalable based on the business requirements. It offers financial planning, budgeting, cash-flow management, forecasting and growth strategies, among other things, as well as bookkeeping and accounting support.

The objective is not just to offload financial responsibilities, but to move them outside of the business.

Ideally, good outsourcing should result in a more structured financial process, provide better accountability for the business owner and allow more opportunity to engage in the business.

Choosing the Right Level of Financial Support

Business owners ought to know what they really need before selecting a provider.

Ask yourself:

• Do my finances make sense and are they in order?

• Need assistance in bookkeeping everyday activities?

• Are there accounting and reporting professional services required?

• Is there any financial planning that I need help with?

• Is it necessary to perform cash-flow forecasting on a regular basis?

• Is there any expansion in my plans?

• Would a strategic finance pro get involved in big decisions?

Based on the answers, you can decide if your current need is bookkeeping, accounting, CFO level support or a mixture of these. In addition, questions about the provider's experience with business of a similar size and industry, communication methods, software employed and the sensitivity of financial information should be asked. As part of its financial support approach, PROCENTAX provides controlled access, secure file sharing and storage, confidentiality-oriented processes and modern accounting systems.

The Bottom Line

With that said, bookkeeping or accounting – what does your expanding business require?

But for many expanding companies, the choice is neither one nor the other. The foundation is bookkeeping. You can count on interpretation, reporting and compliance support from Accounting. For larger companies, CFO-level support can offer further strategic advice, as financial decisions become more complex.

PROCENTAX Finance offers solutions that cater to the evolving requirements of a business in an era of bookkeeping, accounting outsourcing, and strategic financial support.

FAQs

Is bookkeeping equal to accounting?

No, Accounting is about analysing, reporting and interpreting financial information, bookkeeping is the recording and organisation of financial transactions.

Do bookkeepers and accountants need to be employed by a growing business?

Both can be useful to many growing enterprises as they complement each other. Bookkeeping holds the records, accounting can be involved in reporting, compliance and financial analysis.

What are the benefits of Outsourced Bookkeeping Australia services?

As a business expands and starts experiencing more transactions, outsourcing can help ease administrative duties, introduce expertise and help maintain the financial records in order.

What are the ideal scenarios for engaging Virtual CFO Australia?

Virtual CFO support can be valuable when a company requires greater strategic financial advice, like budgeting and forecasting, cash-flow planning or support for expansion.

Is it possible to outsource accounting functions?

Yes, Depending on the businesses and the capabilities of the provider, the businesses can either outsource some accounting and finance functions or opt for a more comprehensive outsourced finance solution.