Accounting services provide critical financial data and information to help businesses operate effectively. There are several key types of accounting services that businesses commonly use, each serving a different purpose.
Understanding the differences between accounting service types can help business owners select the right provider(s) to meet their financial management and reporting needs.
The seven main types of accounting services for businesses are:
1. Bookkeeping Services
Bookkeeping involves recording day-to-day financial transactions, including sales, purchases, receipts, and payments. Bookkeepers handle tasks like maintaining ledgers, receipts, invoices, bank statements, and other records. They provide regular reports to summarize transactions and the overall financial state for business owners and managers.
Bookkeeping is an essential base-level service that gives businesses orderly records of their financial dealings. It helps track cash flow, provides data needed for accounting and taxes, and improves financial visibility so businesses can make better-informed decisions.
2. Payroll Services
Payroll services manage the intricate aspects of employee compensation. This includes calculating wages and salaries, withholding taxes and voluntary deductions, printing and delivering checks or direct deposits, producing year-end tax documents, and filing regular payroll tax reports.
Payroll administration requires keeping up with evolving regulations and due dates. Its complexities make payroll services invaluable for medium and larger businesses, as well as small businesses lacking specialized payroll expertise. Outsourcing to payroll services reduces labor and tax risks that come with handling payroll in-house.
3. Tax Preparation and Planning Services
Knowledgeable accounting professionals thoroughly understand business taxation at multiple government levels. From farmers to bloggers to large enterprises, every business structure faces unique tax liabilities.
Tax prep services deal with regularly filing federal, state, and local tax returns. Tax planning services proactively review tax situations and help legally minimize an organization’s overall tax obligations now and in future years.
During audits, tax services defend filed returns and supply requested documents to verify reporting positions. Ongoing tax advice also helps shape major business decisions with tax implications in mind.
4. Financial Statement Preparation Services
Financial statements are used by lenders, investors, management, and others to evaluate a company’s financial health and performance. Standard financial statements for businesses include:
- Income statement – Shows profitability over a defined period
- Balance sheet – Provides a financial snapshot, outlining assets, liabilities, and equity
- Cash flow statement — Depicts money flowing in and out during the reporting timeframe
- Statement of retained earnings
- Other company-specific reports
Accounting professionals properly prepare these statements by compiling and rigorously analyzing business financial data. The statements must adhere to Generally Accepted Accounting Principles (GAAP) that govern presentation formats and requirements. Audited financial statements provide further assurances of accuracy and completeness.
5. Budget Analysis and Forecasting Services
Sustainable business growth requires financial planning and control. Budget analysis compares actual revenues and costs during a period to the established budgets for those line items. This determines how well or poorly budget estimates aligned with reality.
Armed with this intelligence, businesses revise budgets and operating plans moving forward. Forecasting services use past performance data and other inputs to model likely financial scenarios. Budget analysis and forecasting together empower management teams to make better plans, decisions, and investments.
6. Audit and Assurance Services
Financial audits provide unbiased examination of accounting systems, processes, documentation, computer systems, internal controls, and financial reporting. Qualified auditors systematically analyze whether organizations comply with regulations and standards. Resulting audit opinions give independent assurance of accuracy or recommendations for improvement.
Operational audits similarly evaluate the efficiency and effectiveness of business operations themselves. State and local sales tax audits verify appropriate sales tax was collected and remitted. IT audits target the security and availability of information systems and data. Other specialized audit services also exist.
7. Strategic Advisory Services
Some accounting firms offer broad consulting beyond core accounting, tax, audit, and assurance services. Examples of high-level strategic advisory services include:
– Mergers and acquisitions guidance
– Business valuation services
– Business process improvement consulting
– Technology implementation project support
– Accounting principles and standards advice
– Governance and internal controls assessments
– Due diligence to vet potential deals or investments
– Initial public offering (IPO) readiness consulting
Takeaways
Modern accounting goes well beyond basic bookkeeping and tax prep, encompassing an array of value-added services. As the foundation for financial control and decision making, accurate and timely accounting is an investment that generates returns for any industry and business model. Tapping specialized expertise for the right types of accounting services allows companies to operate more intelligently.
Conclusion
From bookkeeping and payroll to forecasting and advisory services, professional accounting experts offer crucial operational support tailor-made for business needs and goals. Seeking help from qualified, ethical service providers allows organizations to confidently outsource key financial functions so they can stay focused on core operations. With robust accounting services in place, businesses gain insights and capabilities that lead to improved performance.
