Do I need an accountant or a bookkeeper?

The terms ‘accountant’ and ‘bookkeeper’ are often used interchangeably. While they do perform similar roles, there are important differences between accountants and bookkeepers. If you’re a small business owner and you’re trying to figure out what type of assistance you need when it comes to keeping financial records, these tips might help you to choose the right option.

What do accountants and bookkeepers do?

Bookkeepers can take care of functions such as payroll, data entry, petty cash, reconciling bank accounts, and accounts payable and accounts receivable.

If your bookkeeper is a paid employee, they can also prepare and lodge your business’ business activity statements (GST statements or BAS) to the Australian Tax Office.

However, if you are outsourcing these tasks to your bookkeeper, they can charge you for this if they are a registered tax agent or BAS agent. (In theory, they could do it for free, but why would they?)

Bookkeepers can also help you establish procedures and processes to ensure that all your financial data is captured and stored correctly, and this will save you the hassle of rummaging through the third draw down, or a shoebox at the bottom of the wardrobe for your receipts and invoices come tax time.

Accountants can also prepare your tax returns and manage regular financial responsibilities. However, unlike bookkeepers they can advise on complex taxation issues.

Many accountants also provide strategic business advice and some can also provide guidance on personal finances if they have the required financial planning licences.

The essential difference is that while bookkeepers can perform everyday tasks for your business, if you want more strategic advice to help you grow your business and minimise your tax, you should look to an accountant.

Which one does my business need?

Whether you need a bookkeeper or an accountant will depend on what stage your business is in, and what you are hoping to achieve.

For instance, if you have a business with fairly straightforward finances, then perhaps a bookkeeper will meet your needs.

Whether you hire a full-time bookkeeper or simply employ the services of a bookkeeper as you need them will depend on how busy your business is. Do you send out a lot of invoices, receive a lot of bills, and have a payroll to manage? If so, perhaps you need a full-time book keeper.

If, however, you don’t sent out too many accounts or your needs are fairly straightforward, then a casual bookkeeper for a few hours a week might suffice.

You should also keep in mind that there are several cloud-based small business accounting programs which can make account keeping very easy, if you’re savvy with financial concepts and have an understanding of what needs to be done. Many of these can send out invoices and some are linked to your bank account so that you can reconcile your income and expenses within a few minutes a week.

Accountants can generally perform most of the functions bookkeepers do, but they are usually more expensive, so it is a good idea to retain a bookkeeper for the more straightforward day-to-day work.

When you have more complex needs you should engage an accountant.

If your business is growing (or you hope it will grow) your accountant can be an invaluable source of advice. They can advise on areas including cash-flow management, budgeting, strategic planning and identifying key performance drivers – that is, things which can have a major impact on your profitability.

Accountants can also help with tax planning – structuring your finances so that you and your business don’t pay any more tax than you need to.

It is a good idea to seek the advice of an accountant at major milestones for your business – such as taking on a partner, acquiring a significant asset or the sale of the business.

Another time when you should engage an accountant is when you start your business.

You should seek advice on what form of business structure – a sole trader, a partnership, a company or a trust – would best suit your circumstances.

How to choose the right person to work with

Once you have decided whether you want a bookkeeper or an accountant, you need to find the right one for your business.

Both accountants and bookkeepers need to be registered as tax agents or advisors, depending on exactly what they do for you. You can check their registration at the Tax Practitioners Board.

Also, check to see if they are a member of a relevant professional association. Many accountants will be a member of a professional body which requires them to undertake yearly training and professional development activities in order to maintain a high standard of knowledge and skill throughout their career.

Consider if you want a bookkeeper or an accountant with specific knowledge of your industry. At the minimum, you should try to find finance professionals who have worked with businesses similar to yours.

Also, be aware that accountants have specialities. Some are tax accountants, while others focus more on strategic business advice.

Before you hire an accountant or bookkeeper, make sure you meet them or chat with them and get a feeling for whether they are someone you get on well with and would feel comfortable working with.

Finally, ask them how they like to be contacted. Are they happy to receive a quick impromptu phone call if you have a question or do they prefer to schedule meetings – and then consider how this would fit in with the way you like to work.

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