If you’re looking to start a bookkeeping business or a tax business, it can be difficult to decipher the difference between the two fields. Both are crucial aspects of managing a business’s finances, but they differ in their focus and objectives.
Bookkeeping
Bookkeeping involves the systematic recording, tracking, and organization of a company’s financial transactions. It centers on the creation and maintenance of financial records, including invoices, receipts, bank statements, and other financial documents. The bookkeeper’s primary objective is to ensure that all financial transactions are accurately recorded and the financial statements are prepared in a timely and accurate manner.
Bookkeeping is an essential function for businesses of all sizes and starting a bookkeeping business means you’ve entered one of society’s most established industries. Bookkeepers help business owners track their financial position and make informed decisions. Starting a bookkeeping business means you can also help businesses identify areas of financial waste, improve cash flow management, and make more informed decisions about investments and financing.
A bookkeeper will typically assemble financial statements for businesses, including the balance sheet, income statement, and cash flow statement. These statements help business owners understand the financial health of their company and make informed decisions about their finances. However, bookkeepers typically do not provide tax savings or planning services.
Tax preparation
Tax preparation, on the other hand, involves the preparation and filing of tax returns for businesses and individuals. Tax preparers are professionals who are trained to navigate the complexities of the tax code and help businesses and individuals comply with their tax obligations.
This branch of accounting requires additional training and certification, as well as keeping up with current IRS standards and changing tax landscapes for businesses. Tax preparers must be familiar with the latest tax laws and regulations and must be able to navigate the tax code to find ways to reduce their clients’ tax liabilities.
Tax preparers help businesses and individuals maximize their tax savings and plan for their future tax liabilities. They may provide advice on tax planning strategies, such as how to structure a business to minimize tax liabilities or how to make the most of tax deductions and credits. They may also provide advice on how to manage tax liabilities, such as how to pay estimated taxes and how to navigate an audit.
Starting a bookkeeping business vs. a tax business
While bookkeeping and tax preparation are different functions, they are closely related. Good bookkeeping is essential for accurate tax preparation, and tax preparation relies on accurate financial records. By working together, bookkeepers and tax preparers can help businesses and individuals manage their finances and comply with their tax obligations.
If you’re looking to start a business, mastering bookkeeping and tax preparation together gives you the widest breadth of services you can offer clients, but you don’t have to be trained on both branches to get started. Universal Accounting Center offers courses for beginners to learn the basics of bookkeeping, and training for tax preparers.
In conclusion, bookkeeping and tax preparation are both essential functions for managing a business’s finances. Bookkeeping involves the creation and maintenance of financial records, while tax preparation involves the preparation and filing of tax returns. While bookkeepers assemble financial statements for businesses, tax preparers focus on minimizing tax liabilities and planning for future tax obligations. Both functions are crucial for businesses and individuals to manage their finances effectively and comply with their tax obligations.
To learn more about how you can start a bookkeeping or tax business, call Universal Accounting Center at 877-801-8080 today or schedule a time to talk when it’s convenient for you.
