What’s The Difference Between An Accountant And A Bookkeeper?
What is the difference between bookkeeping and accounting? This is a question I get asked a lot, and while both can be highly beneficial to a business, they cover very different areas!
It can be confusing for small business owners, but I’m here to clear things up!
If you’re not sure which service would be best for your business, let’s explore some of their key differences:
A bookkeeper is focused on the day-to-day financial activities
Essentially, your bookkeeper is there to keep a detailed record of what is flowing in and out of your business.
Some tasks that are usually covered by your bookkeeper include:
Recording business transactions
Lodging Business Activity Statements
Processing payments, invoices, receipts and other transaction
Managing reconciliations
Processing payroll
Managing accounts receivable and accounts payable
Calculating GST
Establishing and managing accounting systems and automations
Generating profit and loss statements⠀⠀⠀⠀⠀⠀
These tasks are quite mechanical in nature and don’t often involve analysis of the data.
Accountants play a more analytical and advisory role
While your bookkeeper will focus on managing those day-to-day account activities, your accountant will be expected to analyse this data and draw meaningful conclusions.
It’s often said that “accounting begins where bookkeeping ends”.
Some tasks that your accountant may perform include:
Analyse the financial health of you business
Review profit and loss statements
Prepare tax returns and ensure taxes are paid on time
Investigate cash flow problems
Examine the accuracy of statements
Ensure that records comply with any laws and regulations
Offer financial advice and best-practices recommendations to management
Offer ways to reduce costs and increase revenues
Provide auditing services
Provide business establishment assistance
Offer superannuation fund advice
While your accountant may perform some bookkeeping tasks, they are in a position to offer advice and financial projections to business owners. Their key role is to determine the financial position of the business which can be used by management to make important business decisions.
Your Bookkeeper will often be more cost-effective
Most accountants will have a bachelor's degree or higher in accounting or a related field, which is not necessarily required for bookkeeping. For this reason, there will often be a substantial difference in fees charged by bookkeepers and accountants.
While your accountant can be a highly useful resource within your business, your bookkeeper can do a lot of the “ground work” to reduce those high accountant fees.
After working with a huge variety of small to medium-sized businesses across Australia, this approach seems to works really well: lean on your bookkeeper throughout the year, and approach your accountant during tax time or when you need to make important financial decisions or changes!
This will allow you to enjoy an organised bookkeeping system, keep your cash flow healthy and stay on top of your finances at all times, while keeping your costs down to a minimum.
While bookkeepers and accountants handle very different areas, many small businesses like to consult with both! I have a Diploma in Accounting and over 15 years of business bookkeeping and accounting experience, as well as being currently enrolled in the Certified Public Accountant (CPA) Program, so I like to think I offer my clients a broad range of skills in both these areas.
I personally choose to focus on Bookkeeping at The Kartel Solution, as I feel I can work with more small businesses this way and make a greater impact to their day-to-day lives. If you’re curious to find out how I can help you, please reach out for an obligation-free chat and quote!