There is often a misconception that bookkeeping and accounting are the same thing. While they both work to assist you with your finances, there are some important distinctions between the tasks of a bookkeeper and those of an accountant.
From the outset, it is important to understand that both bookkeepers and accountants can play an integral part in your business.
While their tasks can sometimes overlap, there are certain aspects that you would specifically entrust to an accountant, and others that you would give to your bookkeeper.
Let’s see what the differences and similarities are in the bookkeeper vs accountant debate…
What are the key differences between bookkeepers and accountants?
In simple and very general terms, a bookkeeper will likely be the person who assists you with the ongoing financial recording and transactions that keep your business running smoothly.
Your accountant, on the other hand, will be the person who analyses the data produced by your bookkeeper, reports on it, and is best suited to give you financial advice. Your accountant will also have a strong understanding of your taxation requirements and will be best able to assist in that area.
In order to understand more comprehensively the benefits that both bookkeepers and accountants can offer your business, it can be helpful to be aware of the tasks that each could be expected to undertake.
What bookkeeping tasks does a certified bookkeeper do?
Bookkeepers are instrumental in the ongoing financial upkeep of your business. Some tasks that are regularly undertaken by your bookkeeper can include:
Processing financial transactions
Bookkeeping lies at the heart of the accounting process. It involves handling bank statements, sales and expense receipts, invoices, payments, and other daily transactions.
For instance, a bookkeeper at a local café will record all sales transactions and expenses, ensuring that every dollar is accounted for and categorised correctly.
Maintaining your payroll system
Bookkeepers can also manage payroll processing, ensuring employees are paid correctly and on time.
Most small business owners entrust maintaining their payroll processing to their bookkeepers because it frees more time to manage tasks related to running the business.
Preparing initial financial statements
Keeping your financial records in check also helps to create initial financial statements. Based on your financial data and your financial transactions, bookkeepers create basic financial reports like balance sheets and income statements.
Their purpose is to have a clear overview of your financial transactions and your business’s financial health.
Reconciling accounts and preparing bank reconciliation reports
To ensure accurate financial information, bookkeepers tend to double-check their bookkeeping. They often do so through bank reconciliations–a method of comparing your business accounts to your bank statements.
A skilled bookkeeper will regularly reconcile accounts to ensure that all financial records match your bank statements.
Managing your accounts receivable and accounts payable
One of the bookkeeping services you can get involves tracking amounts owed by debtors and amounts owing to creditors, ensuring your cash flow is managed efficiently.
If you are a business owner who manages everything yourself, in the endless flow of day to day tasks it’s easy to overlook a bill that you owe to your creditors.
Calculating GST
Bookkeepers will also help you to calculate and not overlook your GST.
If you provide goods and services in Australia, your bookkeeper will calculate GST, adding 10% to the base price of your offerings and including this in your sales price or tax invoice.
Preparing and lodging your BAS
One of your bookkeeper’s focuses is also preparing and lodging your BAS. This includes compiling and submitting required financial information to the Australian Taxation Office (ATO) for tax purposes.
Carefully managing your financial records with a bookkeeper in this way can significantly contribute to your business’s success and growth by ensuring no transaction goes unrecorded.
Designing, establishing and reviewing accounting systems
Your bookkeeper can also help you set up and refine your bookkeeping software and accounting software, making sure they are efficient and tailored to your business needs.
While an accountant will also be qualified to assist you in these areas, it is important to be aware that there is likely to be a substantial difference in fees charged by bookkeepers and accountants.
In order to best utilise your budget, extensive consideration into which tasks are to be delegated to a bookkeeper or an accountant is advised.
The role of an accountant in your business, while potentially encompassing some bookkeeping tasks, is often more advisory and analytical in nature.
An accountant will be in a position, through analysis of past performance, to offer financial projections and advice on future financial elements of your business.
| Bookkeeper vs Accountant Summary | ||
| Aspect | Bookkeeper | Accountant |
| Focus of Job | Daily financial transactions | Strategic financial overview |
| Main Tasks | Data entry, bank reconciliation, payroll, BAS preparation, GST calculation | Financial analysis, tax planning, auditing, compliance |
| Outcome | Accurate financial records | Strategic insights, tax optimisation |
| Additional Services | Managing accounts receivable/payable, setting up accounting systems | Business establishment advice, superannuation fund advice |
| Client Interaction | Ongoing management and transaction processing | Periodic financial review and strategic advice |
What accounting tasks does a certified accountant do?
The role of an accountant in your business, while potentially encompassing some bookkeeping tasks, is often more advisory and analytical in nature. During the accounting process, an accountant will be in a position, through financial analysis of past financial transactions and data, to offer you projections and advice on future financial elements of your business.
Taxation Advice and Planning
Accountants provide expert guidance on tax returns, tax compliance, and tax laws, especially during tax season. For example, an accountant for a small manufacturing firm might advise on the best ways to take advantage of tax deductions and credits, ensuring the business remains tax-efficient and in compliance with tax law.
Business Establishment Assistance
They can help you make informed business decisions, particularly when starting a new venture or restructuring an existing one. An accountant might help a new café owner decide whether to operate as a sole trader or a company, based on financial projections and tax implications.
Auditing
Accountants will often take on the role of an internal auditor. They will perform internal audits to ensure your financial records as well as your profit and loss statements are accurate and compliant with regulations.
Corporate Reporting and Compliance
They manage corporate reporting, ensuring adherence to accounting principles and practices. An accountant will follow the best accounting practices and prepare detailed financial reports for stakeholders and ensure all regulatory requirements are met.
Superannuation Fund Advice
Accountants offer advice on managing superannuation funds, helping you plan for the future. An accountant can advise you as a small business owner on the best superannuation options for both yourself and your employees, ensuring long-term financial security.
Financial Management Advice
Accountants analyse financial data to offer strategic advice, helping you make informed decisions that promote business growth and financial health. Let’s say you are a restaurant owner and you’d like to expand your business. An accountant can create a budget and forecast future financial performance to help you plant that business expansion properly and efficiently.
Given that there are substantial differences between the services offered by bookkeepers and accountants, it can be seen that both are important to the growth of your business. Instead of viewing them in a ‘bookkeepers vs accountants’ situation, it is important to understand that your accountant and bookkeeper work best together to serve the financial requirements of your business.
While not an exhaustive list of an accountant’s services, the tasks outlined here serve to highlight the analytical and advisory nature of their position.
Given that there are substantial differences between the services offered by bookkeepers and accountants, it can be seen that both are important to the growth of your business. Instead of viewing them in a ‘bookkeepers vs accountants’ situation, it is important to understand that your accountant and bookkeeper work best together to serve the financial requirements of your business.
How to Use a Bookkeeper and an Accountant Effectively
Bookkeepers and accountants perform different but complementary roles in managing your business’s finances. They may work with similar financial documents, but their services are not the same. Understanding when to hire a bookkeeper or an accountant, and which can bring more value to your small business is essential for success:
When to Hire a Bookkeeper vs an Accountant
Bookkeepers are essential for handling the day-to-day financial tasks of your business. They keep track of all financial transactions, manage payroll, and ensure your financial documents are accurate and up-to-date. You’ll need a bookkeeper to maintain your financial records and keep everything organised so that an accountant can use that information and give you strategic advice.
Accountants come into play for more complex financial analysis and planning. As we mentioned above, accountants analyse the data provided by bookkeepers to give you insights into your business’s financial health.
They help with tax planning, business strategy, and ensuring you comply with all legal requirements. When you need to make significant financial decisions or plan for the future, an accountant is your go-to professional.
But before you get there, no accountant will be able to help you out unless your books are in order. As Sharon MacKinney, owner of SMM consulting recalls, she went to see her accountant and he just looked at her Xero and said, “We’ve got big issues here.”
That’s something you don’t want to hear come the end of the financial year.
So bookkeeping is about actively staying on top of your business finances throughout the year.
Making the best choice for your business
Using both a bookkeeper and an accountant offers many benefits.
A bookkeeper ensures your daily accounting bookkeeping is handled efficiently, so you always have a clear picture of your financial status. This ongoing management helps avoid surprises and keeps your cash flow healthy.
An accountant brings a deeper level of expertise, analysing your financial data to provide strategic advice. They help you understand the bigger picture, offering insights that can lead to better financial health and growth for your small business.
By using both professionals, you ensure your business is well-managed in the present and strategically positioned for the future.
And if you need help with managing your bookkeeping, we can help you partner with a seasoned bookkeeper to ease your mind and keep your books in order!
