If you’re just starting out in business, you might be wondering whether you’ll need the services of a bookkeeper or an accountant – or both, or neither – for your business. This is a good question, because for the uninitiated, these two roles sound pretty similar. After all, they both deal with financial data, and there’s definite areas of overlap between the roles.
Both ensure that your financial records are accurate, both deal with financial reporting and transactions and both help to maintain the financial viability of your business. So, it’s easy to see why business owners can get a little confused when setting up their business’s financial foundation.
However, despite a few areas of overlap, bookkeeping and accounting are two distinctly different roles, with different goals and purposes. Both are important parts of business management, but they are used at different stages of the financial cycle and there are some significant differences between the two. Read on to discover whether you need a bookkeeper or an accountant for your business.
What does a bookkeeper do?
A bookkeeper, as it sounds, essentially manages the “books” (or financial records) of a business. Bookkeeping is part of the accounting process, and a good bookkeeper will keep the records of all financial transactions systematic and accurate. Bookkeeping captures the transactions of a business and accurately records them in a systematic way.
A bookkeeper’s job involves certifying transactions, reviewing accounting records and updating them for each period requiring a financial statement. The tools of a bookkeeper’s trade are paper or electronic receipts, bank statements and contracts, and using these, they will identify, measure and record all financial transactions.
What does an accountant do?
The accounting process is a larger process that involves summarising, interpreting and communicating the financial transactions that the bookkeeper has recorded. Accounting picks up where bookkeeping leaves off, and builds upon the bookkeeping process, producing financial analysis using bookkeeping information.
A good business accountant will provide advice on developing a business to reach its maximum potential, and will report relevant financial information to business owners and investors. This helps business owners and managers gain a better understanding of actual profitability and cash flow.
What’s the difference between bookkeeping and accounting?
While they are closely related and often overlap with each other, bookkeeping and accounting are entirely different things. Bookkeeping is a branch of accounting that ensures financial information is organised and systematic, while accounting uses this information to
gauge a company’s financial health. Bookkeepers record, track and identify a business’s economic and financial operations, while accountants order, catalogue, report on, analyse and summarise this financial information. Accounting converts the information gathered through bookkeeping into statements that show how the business is progressing financially.
Bookkeeping is an important part of the accounting process, and creates a base for accounting to build on. When done correctly, bookkeeping perfectly complements the accounting process; and both help a business function smoothly and contribute to long-term success.
To put it more simply, bookkeeping is recording, while accounting is analysis and interpretation. Bookkeepers deal with the day-to-day details, while accountants deal with the big picture.
When you might need the services of a bookkeeper
Bookkeepers are needed in the early stages of business growth to handle daily transactions and maintain financial records. They make sure bills are entered and paid on time, that money is received and entered on time, reconcile balance sheet accounts, and prepare financial statements. They process payroll, verify expenses, manage approvals and sort documents for tax return.
Your bookkeeper will record the true financial position of a business, as they track how money is spent and how money is earned. These sticklers for accuracy will keep your business legally compliant and financially organised, which keeps your business on track for successful operation over the long term.
Every business needs a bookkeeper, and while business owners sometimes try to complete bookkeeping tasks themselves, it’s far better to let an expert bookkeeper deal with the task. This will help save you time and money, and help prevent you making costly mistakes with your financial data. If you’d like to speak to someone about the bookkeeping needs of your business, Alexilum Bookkeeping is always happy to help. Go to https://alexilum.com.au/contact-us/
When you might need the services of an accountant
An accountant usually comes on board as the business grows and needs more help with managing taxes, supporting expansion, and accessing strategic financial advice. An accountant is crucial for preparing annual statements of accounts, ensuring compliance with tax laws, helping to improve business performance, and resolving complex financial reporting issues.
They can redesign business accounting systems to improve efficiency, analyse the overall health of business finances, create budgets, reports and forecasts, and carry out auditing tasks. Your accountant will examine the financial situation of the company and present this information in useable form to the business directors, bringing an enormous amount of insight to the table and helping you solve your business’s financial problems.
Most businesses will eventually use the services of both a bookkeeper and an accountant, as this is the most efficient way to ensure your business stays financially viable for as long as you need it to.
Leave a Reply