Accounting Software vs Bookkeeping Software vs Billing Software

Accounting Software vs Bookkeeping Software vs Billing Software

The ability to effectively manage an organization's financial transactions is a fundamental foundation for any business. 

However, when it comes to recording financial transactions, one common question arises: What exactly is the distinction between accounting software and bookkeeping software? Although many individuals mistake Bookkeeping and accounting software for the same thing, there are some significant differences. 

Before diving into Accounting Software vs. Bookkeeping Software vs Billing software, we first have to learn the definition of accounting, bookkeeping, and billing.

Accounting Definition

All the activities of bookkeeping are done here. While a bookkeeper's job is to record financial transactions, the accountant analyzes financial information using accounting principles. 

Their duties might seem identical, but there are some significant differences. So let's clear up the confusion. 

Functions of Accounting

Accountants' primary accounting roles include the following:

⇰ Financial Statement Preparation

Although bookkeepers can generate standard reports such as financial statements, accountants are more likely to prepare these reports, which include a balance sheet, income statement, and cash flow statement, as well as any other reports that considered necessary. 

The accountant's responsibilities also include examining the information in the financial records, such as monthly income and expenses, cash flow of the firm on hand, and strategies to improve the company's profitability.

⇰ Revenue and Cost Analysis

Although bookkeepers input transactions, it is the accountant's responsibility to interpret what they signify. This investigation could include analyzing accounting ratios and revising the general ledger. Accountants may look back in time to find trends like rising expenses, declining sales, or profitability analysis.

⇰ Taxes

One of the most important reasons to hire an accountant is for tax purposes. Accountants can also help the business with the preparation of tax returns, it is their knowledge of tax deductions, tax planning, and ways to decrease tax burden that makes them so indispensable. 

⇰ Financial Planning and Management

Accountants are trained to see the broad view. Accountants can provide extensive information and advise on how to raise income, cut expenses, and increase the profitability of your business. Accountants can also advise on improving the business structure and growth maximization.

What is Accounting Software?

Accounting Software solutions are intended to manage increasingly complex financial transactions and provide a more comprehensive view of a company's financial health. These complex transactions include income statements, balance sheets, tax calculations etc. 

A significant advantage of Accounting Software is the capacity to use this data to evaluate, predict, and offer recommendations for a company's financial path, as well as provide a broad view of everything accounting-related.

Since accounting software offers more financial management features is usually more expensive than bookkeeping software. 

Bookkeeping Definition

Bookkeeping is a simple recording of financial transactions, such as bills, invoices, sales, and payments. A bookkeeper often employs a double-entry bookkeeping system to record the business's financial activities.

Functions of Bookkeeping

While their primary responsibility is to record financial transactions, bookkeepers are also responsible for a variety of other tasks that are essential for running a successful organization.

Organize and Classify Transactions

This includes verifying the validity of incoming bills and payment processing.

Invoices Writing

You will never be paid, If your customers do not get an invoice from yo. Bookkeeper duties include recording sales and creating invoices for goods and services rendered.

Bills Payment

Small firms must ensure excellent vendor agreements, which is why paying bills on time is critical.

Track and Record Customer Payments

When you immediately record customer payments, you make certain that your accounts receivable balance is appropriate and that you do not send out a past-due notice to a client who has paid already.

Petty Cash Management

A petty cash account isn't as crucial as it once was, but if your company still has one, it's the bookkeeper's responsibility to ensure that the monies are properly maintained and dispensed.

Bank Statement Reconciliation

An often ignored job, frequently reconciling bank statements avoids potential errors and gives you with an accurate monthly bank balance.

Month-End Adjusting Entries Input

Although bookkeeping software has decreased the number of journal entries needed, month-end adjusting adjustments are still likely to be necessary to account for depreciation, interest, bank charges, and other expenses that may have gone unnoticed.

Generate Financial Statement of the Business

While an accountant's role is to analyze the company’s financial statements, it is often the bookkeeper's job to generate these statements, depending on the organization's needs.

What is Bookkeeping Software?

Using bookkeeping software, the user can easily record the company's daily financial transactions, such as daily income, expenses, sales, invoices, bills, accounts payables and receivables, etc. 

One significant advantage of this software is that users can thoroughly keep records of every financial transaction without error. 

The lack of proper financial analysis tools is a significant drawback of the bookkeeping software. This is also the reason bookkeeping software is less expensive than accounting software. 

Billing Definition

Billing is the process of issuing a document and sending it to a customer for due payment. The bill's main objective is to remind the customer about the owed amount and collect the payment on time.

The Billing Process

The following steps are included in the billing process:

Review the Billing Information

Whom to bill, how much to bill and what to bill are defined here. 

Prepare the Bill Document

After thoroughly reviewing and verifying all information, the billing document is created.

Send the Bill Document

The bill document should be sent immediately to the recipient right after preparing the billing document. Many mediums are used here to send the document, such as email, fax, psychical copy etc. 

Archiving the Copy 

After receiving the payment, a business needs to save a copy of the bill for future reference. In addition, it enables the business to keep track of cash flow and prevent audit lawsuits. 

What is Billing Software?

Billing software is a complex system that allows users to automate the billing process. Using the Billing Software, a user can establish a robust billing structure that allows a business to:

  • Automate billing pricing
  • Follow up on customer
  • Collects due payment on time
  • Generate accurate reports
  • Save data in encrypted cloud storage

Accounting vs. Bookkeeping vs. Billing 

Simply speaking, bookkeeping is focused with recording financial transactions and is more transactional and administrative in nature. Accounting is more subjective, providing insights into your company's financial health based on bookkeeping data.

The accounting equation formula, Assets = Liabilities + Equity, is the foundation of the double-entry accounting system used in accounting and bookkeeping.

Let's take a look at the key differences between accounting, bookkeeping, and billing in the table below:

  Accounting  Bookkeeping


Scope Examines financial statements as well as general ledger balances Records financial transactions and organizes them Billing software covers the minor function of the business, such as payment collection, invoicing, etc.
Process Complexity Make adjustments to closing entries Create and post invoices, and payments Billing software enables users to create and send bills, and invoices to the customers
Specialization Determine profitability, debt, and income reconciles financial records and bank statements Billing software offers robust billing processes such as billing discounts, subscription-based services, payment plans, and methods, etc.
Purpose Accounting is more concerned with the big picture, such as annual report Bookkeeping is concerned with the small picture, such as day-to-day activity Billing software is used for automating the manual work process
Short and Long term tasks Handles tax returns and adheres to tax codes Handles monthly statement Handles current billable payments and process invoicing
Planning and Decision Making Help in creating forecasts and budgets Create financial statements Helps in tracking sales transactions and cash managment


Final Note

Now that you know the similarities and differences between these three software's, you should consider a few things before choosing the desired software for your business.

  • Remember, accounting and bookkeeping software is for you if your business needs to analyze financial data.
  • On the other hand, billing software is for you if your business does not require tracking complex financial information and is only limited to issuing invoices and payment collection from customers.