All businesses require both bookkeeping and accounting but what is the real difference and when do you need a bookkeeper or an accountant? Both have specialised experience and knowledge for the tasks they perform. So let’s breakdown some of the perceived barriers here..
What is bookkeeper? What is an accountant?
The bookkeepers job is to manage the day-to-day financial applications of the business. At the end of the financial year, they then hand over a tidy set of accounts to the accountant to make year-end adjustments for things like depreciation, FBT, home office expenses etc., and prepare tax returns and financial reports.
For income tax or business structure related tasks, this falls into the domain of the accountant. Their role is to make sure you are meeting your tax obligations. They ensure that the business’s accounts accurately reflect the position of the business, and that you are claiming everything you are legally entitled to claim.
Your accountant may also analyse the business’s financial reports, discuss with you its financial health and viability, and advise on how to improve business performance.
Accountants generally have an accounting degree and many have completed further study to become a Chartered Accountant or CPA. Whereas bookkeepers have often learned on the job and have many years’ experience, with many having also studied some accounting papers or qualifications, and are industry-certified.
Bookkeepers and accountants have a very synergistic relationship and, ideally, work well together for the benefit of their mutual client.
Why use a Bookkeeper in your business?
There are many upsides to the great technology now available, however, one of the downsides is that it is often portrayed as being easy to “do it yourself”. Technology still relies on the systems being setup correctly from the start and the information being regularly checked and verified to ensure it is accurate and compliant.
Incorrect data going in equals incorrect data going out, resulting in incorrect IR returns. It’s often a case of “you don’t know what you don’t know. For example, the rules around whether that coffee with a client or that travel booked through an online booking system is tax deductible, or how to treat the GST component. IR does not accept ignorance as an excuse and can be pretty harsh when it comes to charging interest and penalties on incorrectly filed returns.
Incorrect data also means that you are not getting accurate information on how your business is performing. For example, if you code something to an asset account when it should have been an expense account, then your profit calculation will be wrong and your business will look like it is performing better than it actually is. This is the information you are making important business decisions with and so it is extremely important that it is correct.
A great bookkeeper will get to know you and your business inside and out, becoming a valued member of your team as they work alongside you to help your business grow.