Bookkeepers record sales, expenses, and all other financial transactions so that business leaders always know exactly how much money is coming into and going out of the business. Bookkeeping is a crucial activity of any business, as all of the financial statements and reports used by accountants and finance professionals are derived from the data recorded and calculated by the bookkeeper.
Accounting is the preparation and analysis of financial records, such as income statements, balance sheets, and cash flows. Accountants use the data collected and recorded by bookkeepers to assess the financial health of a company, to prepare a company's tax forms, and to help the business's functions, such as marketing and IT, decide how much money to spend on the items they need, such as advertising and computer equipment.
Finance refers to the decision-making necessary for maximizing the profits of a business. Finance professionals use the financial statements and other reports created by accountants (based on the data entered by bookkeepers) to make wise decisions that balance risk and profitability. The CFO and finance professionals determine the company's investment strategies, establish the company's overall budgeting strategy, and manage the company's cash flow.
What Are Accounts Receivable and Invoicing?
Accounts Receivable is money owed to you by your customers for goods or services that have been delivered or used, but payment has not yet been collected. Businesses with accounts receivable typically issue invoices for their products or services.
The invoice represents a legal obligation for the customer to pay for the goods and services based on the terms agreed upon at the time of sale.
What is Accounts Payable?
Accounts payable is the money that a business owes its suppliers, such as payment for office supplies, computer equipment, utilities, advertising expenses, and more. The term refers to unpaid bills and invoices and it is listed on the Balance Sheet as a liability.
In order to efficiently manage the business, business owners must be aware of how much money is coming into the business (accounts receivable) and going out of the business (accounts payable).