Difference Between Business Administration & Accounting

Many small businesses don’t have enough staff to create the variety of departments that larger businesses use to perform specific functions such as marketing, finance, sales and human resources. During their early days, small companies might lump many core tasks into an administrative function, including basic bookkeeping. As your company grows, you will need separate administrative and accounting functions, and knowing the difference between each will help you effectively create both departments.

Business administration is the execution of the many non-specific functions of a business, with its workload determined by the owner or executive team of the company. An analogy might be a nurse who administers medicine. The nurse doesn’t diagnose the patient or create the medicine, but she administers doses properly and on a specific schedule based on the directions of the doctor. Administrative functions at smaller businesses include most office functions, including reception, managing copy machine and cleaning service contractors, routing mail, answering phones and working with a building landlord. As businesses grow, the administrative function expands to include the oversight of most non-production, warehousing and delivery functions. This includes the executive oversight of departments such as marketing, finance, IT and human resources.

Accounting refers to the management of financial matters, including simple bookkeeping, payroll, billing, invoicing and deposits, as well as more complex strategic financial analysis and planning, budgeting, reporting and tax oversight. At small companies, an office manager or administrative assistant might handle the bookkeeping if it’s limited to paying bills and making deposits. This person also often handles basic office administration. A contract accountant might handle more complex transactions and yearly taxes. As a company grows, the accounting function becomes more complex, especially if the company adds employee benefits, increases its assets and debt and has investments.

Accountants classify expenditures differently to help businesses project profit margins as sales rise and fall. Expenses are designated as either manufacturing or overhead costs. Within overhead are marketing, sales, HR, IT and general and administrative, or G&A. G&A costs refer to those non-specific tasks every office performs, including the costs associated with the C-suite, or chief executive office, chief financial officer and chief operating officer, and other employees and functions that don’t fall directly under a specific department.

While accounting is classified as an administrative expense, business administration and accounting differ primarily in that business administration does not execute any bookkeeping, accounting or tax work, while accounting limits its activities primarily to financial work. Both work together to create budgets and long-term strategies, with business administration acting as the “doctor” and accounting taking the role of the “nurse.”