As a small business owner, one of the most important relationships you will have throughout your business journey is the one with your bookkeeper.
Bookkeeping helps you:
- Stay compliant with the ATO
- Keep track of cash flow
- Avoid unexpected bills and GST responsibilities
- Keep growing your business.
With this in mind, the prospect of hiring a bookkeeper can be daunting.
Here’s how to prepare for your initial meeting and choose the right bookkeeping services for your business.
Why Your Business Needs a Professional Bookkeeper
A professional bookkeeper is crucial to maintaining the financial health of your business. Here’s why:
1. Accuracy in Transactions
They ensure every transaction is recorded correctly, providing you with a clear view of your cash flow. This clarity helps you understand your financial position at any given time.
2. GST Compliance
They manage your GST obligations to ensure you comply with tax laws. This means you avoid potential penalties by correctly calculating and paying your GST.
3. Sustainable Business Operations
With accurate financial records, your business can operate more sustainably. You’ll know exactly where your money is going, which helps in making informed decisions about budgeting and investments.
4. Informed Financial Decisions
With a bookkeeper, you can make decisions based on accurate, up-to-date information. This can lead to significant savings and more strategic investment in your business’s growth.
In short, a professional bookkeeper not only keeps your financial records straight but also provides the insights needed to run your business effectively.
By ensuring your financial obligations are met and giving you a clear picture of your financial health, a bookkeeper allows you to focus on growing your business with confidence.
Signs You Need to Hire a Bookkeeper
Feeling overwhelmed with receipts and invoices? Spending too much time on paperwork and not enough on what you love about your business?
These are big hints it’s time to bring in a bookkeeper. It’s like when your backyard gets too wild and you finally call in a gardener.
Sharon MacKinney, owner of SMM consulting, recalls the moment she needed a professional bookkeeper: “I went to see my accountant and he just looked at my Xero and he said, we’ve got big issues here.”
She didn’t have a business process (or the time) to reconcile her invoices, and those really piled up by the end of each month. Come tax season, Sharon realised she was deep in a bookkeeping emergency: “By the time I went in to get my taxes done, Tom (my accountant) said to me, ‘You need to look at a bookkeeper.’”
Bookkeeping vs. Accounting: What’s the Difference?
This brings us to the question of whether you need to hire a bookkeeper or an accountant. Bookkeeping is like keeping a diary of everything your business spends and earns, day in, and day out.
Meanwhile, accounting is more like looking back at that diary to see the big picture, understanding what it all means for your business and what your tax obligations are.
It’s Like Nurses and Doctors for Your Business
Think of bookkeepers like nurses for your business: they keep things running smoothly every day. They’re right there with you, making sure your financial health is tip-top, keeping track of every penny in and out. This is the everyday stuff, making sure you’re on track and everything is as it should be.
Now, accountants? They’re the doctors. They come in after the bookkeepers, check all the work, and give you the big picture. They take a look at what’s happened over the past year and help you make plans for the next. They’re about the overall health and future of your business, making sure you’re set for a healthy year ahead based on what’s been happening.
So, while your bookkeeper makes sure your day-to-day finances are under control, your accountant steps in to give you the broader view and plan out your financial path.
Do You Need a Bookkeeper or an Accounting Firm?
Let’s compare bookkeeping and accounting to see which one you need as a small business owner.
| Feature | Bookkeeping Services | Accounting Services |
| Core Focus | Recording daily financial transactions, data entry, and bank reconciliations. | Analyzing financial data, preparing financial statements, tax planning, and providing strategic financial advice. |
| Main Tasks | – Managing accounts payable/receivable – Bank reconciliation – Payroll processing – Preparing Business Activity Statements (BAS) | – Preparing and analyzing financial reports – Tax return preparation – Advising on tax laws and tax planning- Internal controls and financial transparency |
| Software Used | Xero, MYOB, and QuickBooks Online (focus on data entry and bank feeds) | Same accounting software, with additional tools for financial analysis and tax preparation |
| For Whom | Essential for most small business owners to maintain day-to-day financial accuracy. | Small business owners, especially as they scale or require detailed financial insight for decision-making. |
| Outcome | Ensures financial transactions are accurately recorded and up to date, aiding in cash flow management. | Provides insights into the business’s financial health, helps with saving money through tax planning, and supports strategic business decisions. |
| Professional Background | Professional bookkeepers, certified through bookkeeping associations, with experience in specific business processes. | Chartered accountants or those with an accounting degree, offering a broad range of accounting services beyond basic bookkeeping. |
| Cost Consideration | Rather than relying solely on hourly rates, bookkeepers may set their fees according to your transaction volume, payroll needs, and other specific tasks like BAS filing and representation. | Might be higher due to the specialized nature of services, but can save money in the long term through efficient tax planning and financial advice. |
| When to Hire | From the start of the business to keep financial records straight and manage payroll and bookkeeping emergencies. | When detailed financial analysis, tax advice, and strategic planning are needed to grow or pivot the business. |
Finding an Experienced Bookkeeper for Your Business
Now that we’ve established the role of a good bookkeeper, we turn to Debrah Stanton, the General Manager of First Class Accounts, for insights on securing the perfect bookkeeping partner.
Boasting more than two decades in the financial sector, Debrah shares her expert advice on pinpointing the bookkeeper who aligns with business needs:
It’s OK to Get the Cost Question Out of the Way
The number one question when business owners hire a bookkeeper is ask how much their bookkeeping service will cost.
“It is absolutely okay to ask this question early on in the meeting,” Debrah says. “The response will give you a solid indication of how transparent and knowledgeable the prospective bookkeeper is about your industry.”
While bookkeepers generally work across a range of industries and sectors, there will be factors unique to your business model that will require some discussion with you.
Find the Right Cultural Fit
Debrah says you should never underestimate the importance of finding a cultural fit before you hire a bookkeeper, both with personal values and industry experience: “You need to feel confident you can build a strong working relationship with them.”
5 Questions to Ask When Evaluating Potential Bookkeepers
The key point of advice here for most business owners is to be upfront and honest about their business needs at this initial meeting. “That way, the bookkeeper has the information required to determine what the service may cost,” advises Debrah.
“Keep in mind, however, that if you engage a bookkeeper on a fixed-fee basis and they later discover that there is more work than you indicated, they will be likely to review the pricing structure, she adds.”
To make this process easier, Debrah advises you to ask the following questions to your prospective bookkeeper:
1. What type of accounting system would you prefer to use?
“Cloud-based accounting software is the gold standard these days as it is secure, gives you the ability to streamline your business processes and allows for the quick transfer of data between business and bookkeeper,” Debrah says. “That being said, there may be some instances where a hybrid cloud model may be a better option for businesses who need to maintain some in-house data storage.”
2. How complicated is your industry and business?
Each industry and business is different. “Things such as the number of daily transactions that occur within the business or how many suppliers the business has will affect the amount of work required, notes Debrah.”
3. What level of service will you require?
“While many clients just require basic data input and analysis, others are looking for assistance with payroll, BAS returns and even banking,” Debrah says.
4. What will you bring to the table to help me with my business?
Debrah says business owners should be asking about the bookkeeper’s qualifications and experience, both as a bookkeeper and in previous roles, if bookkeeping is not their first career.
“You also want to determine if they have a focus on professional development, what kind of training they have done recently and if they are fully across bookkeeping practices, ATO legislation and legal requirements,” Debrah notes.
There may be certain times when you will require your bookkeeper to provide additional advice, and Debrah says you should ask a prospective bookkeeper how invested they are prepared to be in your business.
“For business owners just starting out and just generally in difficult economic times, business owners may require more from a bookkeeper, and you need to determine if the bookkeeper is willing to step up at such times,” she adds.
5. What is your availability and role definition?
The role of a bookkeeper should be to add value to their client’s businesses.
Debrah says the most efficient use of a bookkeeper’s time is for them to work remotely on a regular but defined basis: “Consider that if your business requirements mean you need to have someone doing the books for you five days a week, then you need to hire a full-time bookkeeper and not a consultant or freelance bookkeeper.”
“Again, this comes down to having an open and comprehensive discussion with a prospective bookkeeper about your business needs, defining their role and your expectations,” Debrah says.
Leverage Your Bookkeeper’s Expertise
Hiring a bookkeeper is a strategic decision that can significantly enhance the financial management and growth potential of your small business in Australia.
By taking the right steps to evaluate, hire, and work with a bookkeeper, you set your business up for success and help you with long-term planning and compliance needs.
First Class Accounts bookkeepers are your trusted business partners. Get professional bookkeeping support for your business today!
