Accounting vs. Finance: Mirror and Telescope

We’re often asked: “What’s the difference between accounting and finance?”

It’s a common and important question. These two functions are closely related, but they play very different roles in your business. One helps you understand the past. The other helps you plan for the future.

Here’s a clear way to think about it:

🪞 Accounting is the Mirror

Accounting shows you what has already happened in your business.

It records, organizes, and reports financial activity such as revenue, expenses, payroll, and taxes. Clean and accurate books help you stay compliant, file taxes correctly, and understand how your business has performed.

In this sense, accounting is the mirror. It reflects your current financial position based on what has occurred.

Questions accounting helps answer:

  • Did we make a profit last quarter?
  • What do we owe in taxes?
  • How has our cash changed over the last 6 months?

🔭 Finance is the Telescope

Finance looks toward the future.

It takes your accounting data and uses it with assumptions, forecasts, and strategy to help guide decisions. Finance helps with hiring plans, pricing strategies, investment choices, and preparing for growth.

Finance is the telescope. It helps you see what’s ahead, explore new opportunities, and make informed choices.

Questions finance helps answer:

  • Can we afford to expand or hire?
  • What will our cash flow look like in six months?
  • How has our margin changed since we employed a new marketing strategy?
  • What will it take to hit our three-year targets?

Why It Matters

Many small businesses focus only on accounting. That may be enough in the early stages. But once your business begins to grow, the mirror is no longer sufficient.

You need a telescope too. You need a forward-looking view, a plan, and clarity on where you're going and how to get there.

At SMG, we can help with both accounting and finance. As telescopes need mirrors to function properly, we bring a unique expertise in accounting and finance to help build the finance function with the right components.

by Saagar Grover