This is a common question that comes up with our new clients. Both bookkeepers and accountants help you with your finances, and give expert advice for best practises and tax compliance, so what really sets them apart? You might ask why you as a business owner would need to have both to run a successful business, and you wouldn’t be the first. As bookkeeping professionals, we can tell you from experience that for most well-established businesses, success does indeed come with expert financial support.
There are some key fundamental differences between what services your accountant can offer to what your bookkeeper can, and how they each play an important role in a business. Today, we explore these differences, and how together, they can be useful and sometimes vital to keeping your finances healthy and your goals steaming ahead.
The Role of the Bookkeeper
To be blunt, the primary role that a bookkeeper brings to you and your business is making order out of financial chaos. They exist to support your financial management on a regular basis and keep your accounts confidently in order. On a simple day-to-day basis, they help you to categorise, enter, review and reconcile your transactions into your business accounting systems. These transactions come in various forms such as:
Credit card statements
The purpose of helping you to categorise your sales and expense dates in correctly outlined categories is to give you an in-depth view of where you’re making profit and when you’re spending it incorrectly. This provides you accurate visibility across your finances, and a better understanding of where your business is sitting. It helps you to gain a better picture of your current successes, and, of course, opportunities for improvement.
The added bonus in recording your expenses accurately is it makes tax time a lot easier.
Employing a bookkeeper also brings you the experience and in-depth knowledge of GST rulings and what is tax claimable or not. This in turn, makes preparation of lodgements such as BAS much more straight-forward for business owners. Other benefits a bookkeeper can offer is the handling of your accounts payables (bills) and the accounts receivable (invoices). These skilled services will help you know that you’re on top of your business cash flow.
In recent times, some bookkeepers have also extended their range of knowledge to offer additional advisory services, which might include:
Streamlining your operations by helping to develop and maintain your internal business processes.
Overseeing document management and control processes to create more efficiency
Training in your accounting software and add-on software applications
Implementing digital systems for automation of documents e.g. Dext or Hubdoc
Installing POS (Point Of Sale), Payment Gateways and offering knowledge or services to accurately reconcile sales data
To summarise, a bookkeeper is often your first point of contact when it comes to managing your finances, compliance and internal processes to give you the guidance and confidence that your business is running smoothly, and is set for success.
Where bookkeeping ends, accounting begins.
The work of a bookkeeper and an accountant often overlaps, as bookkeeping is of course, part of the accounting process. But while a bookkeeper’s focus is on accurate record-keeping, an accountant’s focus is on interpreting these records into data and analytics. An accountant builds on the information provided to them by you or your bookkeeper. Using these records, their general services include:
Reviewing financial statements prepared by your or your bookkeeper
Analysing and interpreting this information
Turning the information (or records) into a report
Sharing advice based on what they’ve reported
Preparation and lodgement of statutory returns
Advising business owners on legal entity structures
Giving general, important business advice and financial advice (this is very important if your goal is to grow your business)
Accountants have generally completed a degree and are usually members of a statutory association. In doing so, this allows them to give you financial and business advice in accordance with tax and law. Qualified and registered accountants might call themselves CPAs (Certified Public Accountants) or CAs (Chartered Accountants). You can expect an Australian accountant to also be registered with the Tax Practitioners Board and have a Tax Agent Number. Similarly, Bookkeepers today have to also comply with regulatory requirements. They should have completed a Cert 4 in Financial Services and should also hold a licence with the Tax Practitioners Board as well as a BAS Agent Licence number, especially if they are lodging BAS, STP, TPAR on behalf of a business.
Hiring an accountant to take care of your taxes for you eliminates stress and enables you to devote your time to the core elements of running your business. There’s also a lower risk of making mistakes or getting the calculation wrong. If you’re not experienced in accounting, you’ve never filed a tax return before, or you’re unsure about what kinds of expenses you can claim, for example, it’s hugely beneficial to employ an accountant.
Simply put, accountants are fantastic at analysing your financial data at a higher level and can provide you services and advice that requires their specific formal education and licenses, whereas a bookkeeper loves nothing more than getting involved in the everyday financial and operational side of a business. The two go hand-in-hand and in our opinion, the right pair can give your business the ultimate tools to succeed.
We believe every Australian small business needs both to have the best professional help and to support your business along its journey, especially in today’s constantly changing economic environment!
If you’re good with money do you need a Bookkeeper?
Another common question we hear. If you’re already using an accounting system, you’ll know that most of your transactions are automatically pulled to the platform from credit cards, e-commerce tools, bank accounts etc. And if you’ve been running your business, perhaps paying your employees, suppliers, and staying on top of tax returns for some time, it may seem like a waste of investment to pay someone to manage your finances for you.
But there are still so many reasons why businesses need a bookkeeper. For one thing, reconciling your accounts can easily be incorrectly processed, skewing everything. Sure, your accounting software requires less manual input, and for a bookkeeper this means they don’t need to enter your financial data from scratch, but they still need to confirm that your transactions are allocated to the correct accounts, and that your reconciled data matches up. If not, they have the know-how to move your transactions within your software manually. This is often a back-end complex that can be overlooked, or too complicated for a business owner to understand, or have time for.
Keeping up with your accounts, staying on top of your obligations and being up-to-date with latest legislations takes a lot of time and if something is missed, you could be facing hefty fines, angry employees or huge debts. Adding these tasks to your diary and ensuring nothing is missed can literally be a full-time job.
A bookkeeper’s role exists to take the accounting stress off your shoulders so that you can focus on what you’re good at – developing and working on your business.
Punctuality is key when it comes to finance. Your diary as a business owner can be filled with meetings, marketing, employee management etc. Ensuring your bills are paid on time can chew into valuable time and input in your business (especially once your business starts to grow). Bookkeepers are dedicated to ensuring that your name as business and/or client remains trustworthy by overseeing all of your payments on time. They can also ensure you as the business is getting paid on time too.
Bookkeepers cover a variety of support and services from managing your payroll to helping prepare your taxes. They’re a jack of all trades with endless knowledge and support, and given today’s internet age, finding one can be easy, affordable and there is plenty of flexibility on how much or often you employ their services.
You might think that you can save money by doing everything yourself with the help of an accounting system, but it may cost you more in the long term.
The benefits of employing bookkeepers and accountants
We’ve now established that between the two professions there are similarities, but also several crucial differences. Bookkeeping is focused on recording information and ensuring your books are up to date, while accounting offers deeper interpretation and analysis of your financial information. The work undertaken by bookkeepers lays the foundations for accountants, enabling them to prepare reports, file tax returns and offer insightful, tailored financial advice.
In business, there’s nothing more crucial than making money and managing debts. To stay afloat and achieve goals and objectives, you have to turn over profits. If you don’t have a firm grip on your finances, there’s every chance that you could encounter unexpected obstacles or run into cash flow issues. Hiring professionals will ensure that your books are in order, and you are set for success from day one. Between a bookkeeper and accountant, they can also provide you with topline advice and decisions that can heavily influence your business.
When a client’s chosen bookkeeper and accountant work together as a team, it can offer so much more to your business from confidence to insight, knowledge to time. Because the Bookkeeper is focused on the everyday side of the business, they can quickly identify red flags or opportunities such as foreseeing cash flow issues, if a business loan or overdraft may be needed. They may identify a good time to sell the business, or give advice on when purchasing assets for the business is appropriate, or worth holding off on.
A bookkeeper that understands your business can provide your chosen accountant the most relevant, up-to-date information so that in turn, your accountant can give you accurate support and advice to make topline financial decisions for the business.
The vital role accounting software plays
As with most aspects of business, the art of bookkeeping has been impacted by the rise of technology in many positive ways. While the vast majority of businesses used to manage their accounts using traditional bookkeeping techniques on paper or spreadsheets, today, most use software programmes. Accounting software now saves endless hours of time and resources, and enables businesses, bookkeepers and accountants to achieve and build stronger financials, and forecast growth faster than ever before. Much like technology has enhanced how many professionals operate, utilising accounting software for business is now best practise in all aspects of business and in order to operate efficiently, is quite honestly, vital for any business.
Utilising the right accounting software alongside employing the right bookkeeper and accountant for your business is the perfect trifecta to succeed.
In the past, without accounting software, most business owners would have to eventually invest heavily in employing a full time bookkeeper and accountant. Nowadays, good software can eliminate the majority of repetitive tasks needed to manage your business finances and in turn, allows most businesses to implement a hybrid method of bookkeeping – outsourcing the professional support as and when needed. Almost all skilled bookkeeping and accounting professionals are well versed in top used accounting programs such as Xero, MYOB and QuickBooks, further saving you time and offering you the knowledge and experience to implement and use the software, and it’s uses relevant to your business with ease. Often, their profession and skill set adapts to meet the demands of clients today in accordance with their chosen software. A perfect example would be the growing expectation of business owners to access up-to-date information records at any time of the day online. With this in mind, modern-day bookkeepers and accountants create records and reports that are available online at the touch of a button.
When should you employ financial support?
It’s never too early – or late – to take on a bookkeeper or accountant. Many well seasoned entrepreneurs have learned only in later years how much time and investment they could have and can save by bringing on the right financial teams.
Business owners, who hire financial support in the early stages of their growth, rarely regret it…if ever!
Even in the planning and development of your business or startup, an accounting professional can review your business ideas, current financials and help you create a plan with expert advice, ultimately saving you time and money in the future. Having the support of a bookkeeper early on will free up your time, train you as needed and will allow you to focus on the most important part – your business.
To summarise, there’s never a wrong time to consider bringing in an expert to help you manage your finances, and in 2022, there are endless possibilities to find the right, affordable support!