Accounting services are vital for businesses of all sizes to operate responsibly.
Without the help of an accountant, it may become difficult for a business owner to keep track of all of his or her vital financial data.
In this article we will discuss exactly what accounting services are, the benefits of accounting services, and the most common types of accounting services.
What Are Accounting Services: Examples of the Most Common Services
Bookkeeping
Bookkeeping is the process of tracking all of the incoming and outgoing transactions that occur within a business.
In other words, the accountant (or bookkeeper) is responsible for tracking the inflow and outflow of money through a business for the purpose of providing a clear picture of a business' financial situation.
The accountant will then use these records to create financial statements that dive deep into the financial position of a business.
Without proper record keeping, the accountant would have no (or inaccurate) data to work with and therefore would not be able accurately portray the financial health of a business to its shareholders.
Accurate bookkeeping is absolutely crucial to the success of any business which is why it is also the responsibility of the accountant (or bookkeeper) to double-check all inputs and outputs to ensure everything was recording correctly.
Bank Reconciliation
Bank reconciliation is the process of comparing the businesses records to the transactions listed on the actual bank statement.
Put simply, reconciling your bank account is the process of matching the transactions you have recorded in your books to the transactions that have been posted on your bank statement.
This is normally done at the end of each month at the very least, but many larger businesses elect to reconcile their accounts each week or even each day.
Bank reconciliation is a highly important task because this process ensures that every cent that flowed through your business has been accounted for.
If your records are accurate then they will match perfectly with each transaction on your bank statement.
Accounts Receivable Management
Accounts receivable consist of all expected or scheduled sources of revenue that have not been paid out by the customer yet.
Essentially, accounts receivable is money that is owed to your business that has not been paid out by the customer.
For example, if a customer purchases $500 worth of wood on account from a home improvement store, this transaction would increase the home improvement store's accounts receivable amount by $500 because they are owed this money but they have not received it yet.
Without keeping track of how much money your business is owed, there is no way to precisely track the true financial position of your business.
Accounts Payable Management
Accounts payable consist of all payments that your business owes to its vendors that have not been paid out yet.
Keeping track of accounts payable is an important role of your accountant because without proper A/P management you may miss certain payments and have an inaccurate picture of your true financial health.
Payroll Processing
Payroll processing is another accounting service that plays a large part in the success of your business.
It is the accountants responsibility to properly collect all employee information, set up all necessary time tracking systems, and accurately process all payouts to employees.
Although a lot of the actual payroll processing can be automated, it is still crucial for the accountant to create payroll reports for the business owner to fully understand one of their largest expenses: salaries and wages.
Tax Planning and Tax Preparation
One of the most common accounting services is tax planning and preparation in which the accountant uses their knowledge of tax code to take full advantage of certain tax rules that will minimize a businesses tax liability at the end of a period.
Proper tax preparation is not possible without having accurate and up-to-date books for the accountant to pull financial data from.
This is why it is necessary to have a competent bookkeeper who will be able to correctly record all of your financial data.
Entity Formation
An accountant can also help you choose which business entity is best for your situation.
Choosing the correct business entity can be a daunting task for a new entrepreneur since there are multiple different entities to choose from and each business structure has its own advantages and disadvantages.
The common types of business entity are sole proprietorship, partnership, limited liability company (LLC), C corp, and S corp.
Financial Reporting and Analysis
Accountants use all of the bookkeeping data to create financial reports for a business, including the profit and loss statement, the balance sheet, and the statement of cashflows.
Without this accounting service, business owners would have no way to judge the performance of their company over a certain period of time, and would also not have an accurate snapshot of the current financial health of the business.
Benefits of Accounting Services
1) Minimize Errors
Having a professional to look over your shoulder and ensure the accuracy of your data is life-saving for many business owners as bookkeeping and record keeping can open the door to many slight human errors that can cause major problems when it comes time to analyze your company's performance based on the financial data in the books.
2) Increase Scalability
When you hand over accounting responsibilities to a professional, you free up your time to focus more on growing your business rather than getting stuck in the day-to-day record keeping.
3) Gain Powerful Insights
An experienced, knowledgeable accountant will be able to help you extract highly valuable financial metrics from your reports that may have gone unnoticed otherwise.
The more useful insights you have about the financial performance and health of your business, the better you will be able to predict and maneuver your company through periods of growth or distress.
Common Types of Accounting Services
Public Accounting
Public accountants provide accounting services to companies that are publicly listed and tradable on stock exchanges.
These types of companies are held to much stricter reporting regulations compared to private companies because a public company's financial data is being used by the public to make investing decisions.
Many accountants will also get their CPA (Certified Public Accountant) designation in order to boost their earning potential and build more credibility with their clients.
Government Accounting
Due to the scale and regulation of most state and local governments, the accounting work can become quite complicated at times and can takes teams of accountants to ensure that everything is being reported properly.
Management Accounting
Managerial accounting entails organizing, interpreting, and communicating the financial data of a company to the managers and owners in order to provide them with a better understanding of their company's financial position.
Managerial accountants will create financial statements in order to best communicate how well a company is performing as well as to show the current financial health of a company.
Forensic Accounting
Forensic accounting is all about digging up information about a person or entity that can be used for legal or other purposes.
Normally, forensic accounting is associated with lawsuits and cases of fraud.
Tax Accounting
Tax accountants deal with planning and preparing taxes for individuals and businesses.
It is the job of a tax accountant to read through financial data to determine the correct amount of taxes to be paid, as well as knowing the tax code well enough to be able to suggest ways to minimize the tax liability for a business or individual.
Internal Auditing
The job of an internal auditor is to assess a businesses internal systems and controls to ensure that the business is not only operating efficiently, but also staying compliant with the multitude of regulatory agencies that larger businesses must keep happy.
What Are Accounting Services: The Bottom Line
Accounting services provide vital support to businesses of all sizes and play a huge role in the success or failure of a business.
As a business owner, it is absolutely crucial to have a trusted, experienced professional around to ensure that all financial data is being recorded and analyzed properly so that you always have a finger on the financial performance and position of your company.
How Noon Can Help Your Business Thrive
Noon Bookkeeping is an outsourced bookkeeping and accounting solution for business owners consisting of a team of CPA's and certified, expert bookkeepers ready to help you organize the finances of your business.
Noon can handle all of your bookkeeping in one place so that you can focus on running and growing your unique business knowing that we’ve got your finances handled.
Learn more about how Noon can help you take control of your finances.