Bookkeeping, Accounting, and FP&A: What Founders Should Know

Why This Matters

Early on, finance can feel like a single bucket, handling expenses, sending invoices, and maybe reviewing a few spreadsheets each month. As your company grows, different layers of financial support start to show up, and knowing how to use them can make a real difference.

Bookkeeping, accounting, and FP&A (Financial Planning and Analysis) each serve distinct functions in a healthy business. They answer different questions, require different tools, and come into play at different stages of growth. If you’re making your first finance hire, working with a fractional partner, or simply trying to get your arms around the numbers, this breakdown will help you understand what matters when.

1. Bookkeeping: Keeping the Records Straight

What it is: Bookkeeping is the most operational part of your finance function. It involves recording day-to-day transactions, categorizing expenses, reconciling bank accounts, and keeping your books current.

Why it matters: Accurate bookkeeping creates a foundation for everything else. It supports clean tax filings, helps you understand your spend, and makes it easier to work with investors, lenders, or finance consultants down the road. Poor bookkeeping, by contrast, can lead to missed deductions, confusion during diligence, or delays in preparing reliable financials. creates a foundation for everything else. It supports clean tax filings, helps you understand your spend, and makes it easier to work with investors, lenders, or finance consultants down the road.

When to invest: As soon as you start spending real money. Even a part-time bookkeeper or bookkeeping software can be a big help. For many startups, this is the first external finance partner.

2. Accounting: Structuring the Story

What it is: Accounting takes the raw data from your books and turns it into financial statements, your Profit & Loss, Balance Sheet, and Cash Flow Statement. It ensures compliance, manages tax strategy, and supports reporting accuracy.

Why it matters: Investors expect accrual-based financials that reflect your true performance. Unlike cash accounting, which tracks when money changes hands, accrual accounting shows when revenue is earned and expenses are incurred, offering a more accurate picture of how your business is operating. Accountants help you present a consistent, trustworthy picture of your business. that reflect your true performance. Accountants help you present a consistent, trustworthy picture of your business.

When to invest: Often around Seed or Series A, when GAAP-compliant reporting, tax preparation, or audit readiness become important. A controller or external CPA firm can help fill this gap.

3. FP&A: Looking Forward, Not Just Back

What it is: FP&A (Financial Planning & Analysis) is focused on the future. It includes building financial models, creating budgets and forecasts, analyzing variances, and helping leadership make more informed decisions.

Why it matters: While bookkeeping and accounting explain what has happened, FP&A helps you anticipate what’s next. It supports hiring plans, pricing strategy, fundraising, and resource allocation. It also enables scenario planning, so you can compare tradeoffs and make informed choices before committing resources. It supports hiring plans, pricing strategy, fundraising, and resource allocation.

When to invest: Once you start thinking in quarters instead of months, or need to build a runway model, manage burn, or prepare for a board meeting. Often starts with a fractional leader or someone wearing multiple hats.

Important Distinctions

Each of these functions plays a different role:

• Bookkeeping tracks transactions.

• Accounting formalizes and reports results.

• FP&A helps drive strategic decisions.

It’s common to assume one hire can cover it all, but clarity here helps you hire the right expertise at the right time.

Final Thoughts

Understanding these differences isn’t about getting the terminology right, it’s about building a financial backbone that supports smarter growth. Bringing in the right support at the right time reduces the risk of gaps in reporting, avoids hiring mismatches, and helps your business scale with more confidence and less guesswork..

If your current setup feels reactive, or if you’re unsure whether you’re getting the right support in each area, now might be a good time to step back and assess. Building the right layers early can save you time, cost, and confusion later on.

If you want an outside perspective on how your finance function is set up, or where to start, I am always happy to talk through what makes sense for your stage.

Let’s connect to explore what your next step might look like.