Accounting vs. Financial Planning: A Look at the Differences
Whether you're just starting your first business or have someone else doing your accounting because it's not your area of expertise, there can be a lot of confusion over the difference between business accounting and financial planning. Fortunately, you don't need to understand the ins and outs of each specialty to understand the broad strokes of what each entails.
The shortest way to contrast these two specialties is that accounting looks to past financial activity, while financial planning looks towards the future of the business. This doesn't mean that these are their exclusive domains, but more of a general approach, as financial planners will consider the past in forming a future strategy, and accountants look at upcoming tax laws to provide a strategy for tax savings.
An accountant looks at changes in the tax law to recommend a strategy for individuals and businesses to minimize how much money they need to pay on April 15. However, business accounting also deals extensively with paying bills that are due and recording funds that have come in. This process creates a record of past transactions that the business has undertaken, providing it with documentation of income and expenses, assets, liabilities and equity. They also prepare a range of financial reports that show the financial condition of the business through a particular period of time.
By comparison, financial planning helps you invest those funds wisely, so that your business will continue to grow and flourish. Financial planners look at the big picture and how certain changes can improve your company's bottom line overall. They tend to be very goal-oriented, focused on helping you reach certain milestones, such as creating a diverse portfolio of recommended investments to both grow your equity while limiting risk. But beyond simple investments, they also help with budgeting, determining insurance needs, determining asset allocation, estate planning and business structure strategies.
By having a better grasp of the difference between accounting and financial planning, you can find the help you need for your specific situation. At AccountRely, we've formed partnerships with other business services companies, including financial planners. If you need help with getting your business' accounts and finances worked out, we're always ready to help. Please feel free to contact us today to get started.