Why Your Accountant Shouldn’t Do Your Bookkeeping — Here’s What You Need to Know…
Some business owners make the mistake of using the terms bookkeeper and accountant interchangeably, while others simply don’t know the difference. Although these two roles share common goals, such as assisting you with your finances and providing documentation to help in assessing your business’ financial health, knowing the differences between the two is essential to help you determine whether you need an accountant or bookkeeper.
To help enlighten you, we’ve collated everything you need to know to better distinguish the role of an accountant from that of a bookkeeper. And after reading this post, we’re hoping you’ll develop a full appreciation of why both jobs are important to your business.
What an accountant does
Certified public accountants and chartered accountants can perform bookkeeping tasks, if needed, but usually don’t as they undertake many extra years of study and training compared to a bookkeeper. Hence, they normally charge a higher fee than a bookkeeper and are expected to perform advisory and analytical tasks.
An accountant is focused on offering financial projections and advice on the future finances of your business based on their analysis of financial data or business financials, such as the previous year’s performance of your business. With the advice of an accountant, you can then expect to make better, informed business decisions.
Other specific services an accountant can provide include:
- Analysis of operational costs
- Business establishment assistance
- Completing tax returns
- Corporate reporting and compliance
- Financial management guidance
- Preparing and adjusting entries
- Preparing financial statements
- Superannuation fund advice
- Taxation advice and planning
Although this may not be a complete list, the tasks mentioned above indicate the analytical and advisory nature of the accountant role.
What a bookkeeper does
At the core of bookkeeping is maintaining the general ledger — a basic document where the bookkeeper records the details of day-to-day financial transactions from the sales and expense receipts. Originally, ledgers were always done on paper, but today, much of this work is computerised, so bookkeepers also do a fair amount of data entry work. Through computerisation using software such as Xero, Quickbooks, MYOB, Netsuite, etc., it is now much easier to perform the tasks needed to update a ledger.
Compared to the role of an accountant, the job of a bookkeeper can be considered simpler, although it’s an essential part of documenting and safeguarding the financial aspect of your business. The bookkeeper is usually the person who will be assisting you with collating financial records, maintaining general ledgers and recording financial transactions to ensure your business continues to run smoothly.
In general, the bookkeeper is in charge of the following tasks:
- Balancing and maintaining general ledgers, subsidiaries and historical accounts
- Calculating goods and services tax (GST)
- Completing payroll
- Designing, establishing and reviewing accounting systems
- Managing the accounts receivable and accounts payable
- Posting debits and credits
- Preparing and lodging your business activity statement (BAS)
- Preparing initial financial statements
- Processing and maintaining your payroll system
- Processing and recording invoices, receipts, payments and other financial transactions
- Reconciling accounts and preparing reconciliation reports
There are several other tasks that a bookkeeper can take on for small businesses. As seen in the functions outlined above, a bookkeeper’s roles are usually related to the ongoing maintenance of your financial records.
So, should you get an accountant or bookkeeper?
Knowing the major differences between the roles of bookkeepers and accountants, it’s quite obvious that both are critical to the growth of your business. A bookkeeper essentially collates a large proportion of the data an accountant needs to make analyses.
So, instead of looking at this as an accountant-versus-bookkeeper kind of situation, it’s important to note that both professionals work together to best serve the financial requirements of your business.