When we talk about accounting and finance it is like talking about two cousins, although related they are very different and only talk to each other on very specific moments (holidays, birthdays etc…). We wanted to break down the differences, similarities and how as SME owners you should be using each of them:
Differences: Accounting and Finance are two very different areas of business. Accounting focuses on the recording and maintaining of a company’s books as well as tax and corporate structure that a company should have, its reports and liaison with government institutions like ASIC and the ATO. It is more of a foundation area of business (I.E Without it, building a business is very hard). Finance, on the other hand, is more focused on providing financial products, services and advice to companies or customers. I.E. Lending, stocks, investments, financial planning, etc… Finance it is as big a part of business as any other area, without it businesses can become very difficult to scale and grow.
“Finance and Accounting are two separate disciples that often are lumped together (as we obviously have done). At a high level, Finance is the science of planning the distribution of a business’ assets. Accounting is the art of the recording and reporting financial transactions.
(— https://business.salary.com/)
Similarities:
The major similarity is quite obvious, numbers. It is all about numbers, specifically the numbers that consequently lead to your financial position either as a person or a company. Accounting and Finance can work together (and should) to get a company/person from a particular point to another in financial terms. Accounting and Finance are both very highly regarded professions and both of them are quite important for the normal operations of a company. The great things about both of these subjects/industries is that their professionals don’t try to get into the others area, I.E. You won’t see an accountant putting together a financial product for a customer, nor a finance broker structuring the tax for a company. They all know their limitations but are quite happy referring business between themselves.
How to use them to grow your business:
I will make it easy, Accounting is the land and initial foundation of your business, your sales are the bricks, materials and labor to build the house, but finance is what gets you from A to B if your sales fall short and you still need a house. Although both accounting and finance are very broad professions/areas the recommended approach on how to use both is straightforward.
Hire an accountant as soon as possible to get the tax and company structure set up as well as to put in place an accounting software, these will enable a good and flawless start for your company. After you start making a good amount of revenue then start thinking where you want to take your company, and that is where finance comes in. You can talk to a financial planner, or financial adviser. They will tell you the different options you have to scale your business by using financial products, strategies or knowledge (sometimes you don’t even need extra capital, just a different strategy to get to where you want to be).
A quick but important tip:
When I say ” Talk to a financial planner/adviser” I don’t mean go to your transnational bank and ask for their advise. Every person sees what they want to see (or what they are trained to see) I.E a mortgage broker will tell you to buy a house, a stock market broker will tell you to buy shares, a loan broker will give you some personal loans and credit cards. That is why we encourage our clients to discuss their position with financial planners that are across all different options and how to use each of them.