There is a familiar phrase that says, “Accounting is the Language of Business” but many non-accountants say that there is a lot of jargon associated with the work of the finances of a business.
Below we will clarify three of those common terms that make up the language of accounting and finance.
To many not directly invloved with accountants and accountancy the general idea most people have around what we do is to spend time recording the transactions within a business. By recording this information it is then possible to tell the story of what is happening inside a company. But if you look deeper you will see that there is much more we can do to help the businesses and individuals we work with to become more profitable and successful.
We often get asked, what is the difference between bookkeeping, accounting and the work of an auditor. In its simplest form the difference between them is as follows:
- Auditor: They do the one thing everyone else cannot, they can audit and verify the work of the others. They can certify financials.
- Bookkeeping: This is the recording of all transactions up to and preparing the financials, the P&L, income statements and balance sheets.
- Accounting: This is where it all comes together. The accountant is the one telling the story of the business. They point out the trends, they know the ratios and can foretell the future. Their job is to understand the past to help the clients and/or employer prepare for the future.
Some may try to define each role based on training, education, degrees, certifications or even experience but in reality, it is best defined by what is done. There are many auditors that only do write-up work and are only providing bookkeeping services.
Helping the client understand their business so that they can make more intelligent business decisions is the role of a “Profit and Growth Expert”. As such the accountant finds their voice to effectively communicate to their clients and/or employers the information needed to ensure the business is operating in profit and avoids taking a loss.
The accountant can help a business look forward, and use there knowledge of the numbers to make more intelligent business decisions based on the data. Thus ensuring a business finds more success.