What is the Difference Between Finance and Accounting?

People tend to use “accounting” and “finance” interchangeably. While both fields are intertwined, they each have a unique purpose. As a startup founder, managing your finances effectively is crucial for long-term success. Understanding startup finance and accounting is the first step.

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The good news? You can do it all on your own with very little time and hassle.

First, let’s define the key difference between accounting and finance in simple terms. 

Accounting

Accounting focuses on the day-to-day management of financial records and financial reporting.

This gives you a historical view of your company's financial health and detailed tracking of all financial activities. Proper financial accounting is essential for meeting legal requirements and maintaining transparency with stakeholders.

This becomes particularly important for startups during tax season and fundraising.

Finance

Finance, on the other hand, is about financial strategy for future growth through investment, managing assets, financial resources and risk management.

It’s forward-facing and the aim is to optimize the financial performance of an entity, enhance its value, and ensure long-term sustainability.

How do finance and accounting relate to each other?

Accounting lays the groundwork with clear financial data, and finance uses that information to navigate the company's financial future. Your company needs both in order to achieve economic stability and potential for growth.

Do I need to hire someone to manage my accounting and finances?

For early-stage founders, the thought of hiring a bookkeeper or an accountant might seem too complex and expensive. Platforms like Puzzle.io are designed for founders to manage their bookkeeping, accounting, and finances independently. You can handle all of your accounting and finances yourself, without spending valuable time and resources.

This self-sufficiency is crucial in the early days, but as your business grows, the complexity does too. That's when you’ll need the expertise of a dedicated bookkeeper and a tax advisor.

What is the difference between a bookkeeper and a Certified Public Accountant (CPA)?

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A bookkeeper is responsible for the day-to-day financial tasks of a business. They will keep your accounting system up-to-date and make sure your financial reports are accurate. While you are busy growing your business, they will record financial transactions, make financial statements, manage payroll and income statements, and ensure bills are paid on time. Bookkeepers maintain accurate financial records and balance sheets, which are critical for the operational health of a company.

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A Certified Public Accountant (CPA) is a finance professional with a state-issued license. CPAs perform higher-level financial analysis, tax preparation, and auditing services. They can also offer strategic advice for financial planning and compliance. CPAs often oversee the work of bookkeepers and are needed in more complex financial decision-making processes.

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Note: The role of a financial analyst is significantly different. They focus on evaluating financial data and economic trends to help businesses make investment decisions. Unlike bookkeepers, who manage daily financial transactions, or CPAs, who ensure financial compliance and offer tax-related services, financial analysts identify investment opportunities and assess financial risks.

Who should I hire first?

The first role that is recommended to add to your team is a bookkeeper. Accurate bookkeeping is essential for managing your business, updating investors, and filing taxes.

The next role to consider is a tax advisor, typically a Certified Public Accountant (CPA). They need to have experience in your specific industry to help you navigate the complexities of your unique financial landscape.

Thankfully, you don’t have to hire either of these as internal employees. You can use a service like Puzzle.io that lets you pull them in as you need.

How to outsource your bookkeeping and accounting

With Puzzle, you can start off self-managing your finances and inviting a professional as needed. We have a live-chat feature in our accounting dashboard that gives you access to a network of certified bookkeepers and accounting professionals available for hire at any time, depending on your financial position. 

💡 Tip: Make sure you secure a tax advisor before the year-end to manage any tax-related issues and tax returns effectively. They’re hard to come by during tax season.

Ideally, your accounting tool allows you to pull these people in as needed without having to actually hire a financial team. Access to your real-time financial insights combined with a network of finance experts is everything your company needs to thrive. Now that you know the differences between accounting and finance, you can make the best decision for your team. 

Streamline your accounting and finances at https://puzzle.io/