Business Bookkeeping Versus Personal Accounting

When businesses are first beginning, the owners are usually responsible for all aspects of them, from marketing, to production, to accounting. At this stage, owners usually have the time to complete these important tasks but not the money to delegate them; hence, they often end up managing everything themselves because they can’t afford not to. They probably do their own taxes, use accounting software, and hope to pay themselves correctly.

After more business maturity, however, owners become more likely to outsource their business bookkeeping or hire an accounting firm to helps them take these tasks off their plates.

Scher Group, an expert source for small business bookkeeping service in Boulder, often observes these stages within individual businesses in our community. We can help you know when it’s a good time to consider enlisting outside accounting services or a Boulder CPA to keep your business growing and running smoothly. It helps to begin by understanding the fundamentals of personal accounting versus business accounting.

Business Bookkeeping Versus Personal Accounting: The Similarities

Similarities include knowing your income and expenses, budgeting, and paying bills. In both business and personal finances, it is important to know how much is coming in and going out, as well as controlling those costs. In personal accounting, we typically have a regular income from very few sources, as well as regular bills. We also have money put aside for emergencies, irregular expenses, or special purchases such as a vacation.

In business, however, our income may not be as regular. Revenue can come in seasonally or could be dependent on sales cycles. We need to know what our expenses are, but we also may have more irregular expenses that change in direct response to sales, such as inventory adjustments. Cash flow becomes more important in order to regulate our expenses to pay vendors and/or to purchase needed supplies or equipment.

Staying on top of accounting information can help a business owner know when it makes sense to hire another employee, invest in more supplies, or to know how much money should be set aside for large purchases, emergencies, or slow periods.

Business Bookkeeping vs. Personal Accounting: The Differences

Business bookkeeping requires more management, more understanding, and more information. It is precisely why many CEOs choose to outsource their bookkeeping services. They want to have more information in which to make decisions. They also want to limit their exposure to loss.

In personal accounting, we are likely to have our taxes pulled for us from our paychecks. If we don’t pay a bill, we may get a harassing call. In business, however, we are fully responsible for paying taxes and possibly even making payroll in a timely and accurate manner. Many business owners don’t have the skills or interest in doing it. Furthermore, if there are errors in either, the CEO can face significant consequences such as fines, penalties, or even litigation.

When business owners are late in paying bills, they can face additional fees and interest rates, and it can hurt valuable relationships with their vendors. Using timely and accurate business bookkeeping data can be the difference between a business remaining open or not.

Taking bookkeeping off your plate can help you obtain more freedom and allow you to be more educated in managing and directing your business. A good way to prevent costly errors is to consider outsourcing your accounting.

Scher Group, a premier business bookkeeping service in Boulder. Contact Scher Group can help your business with tax preparation and planning, Boulder small business accounting services, and other financial services. To learn more, contact Scher Group at 303-443-9001.

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