Dating advice for the finance industry
We have all seen studies that show that success in business is significantly more likely if you have a trusted professional managing your
business finances. But choosing that professional is like choosing a fabulous life partner, a bit of a puzzle. They should be supportive,
trustworthy, always have your back and give you honest feedback. Easy Peasy Lemon Squeezy! Once you have solved that little doozy, the other
dilemma I often hear is “Should I invest in a bookkeeper or an accountant or even have both”? The two roles can seem quite similar, but
there are differences. While bookkeepers and accountants share common goals, they support your business in various stages of the financial
Bookkeeping focusses on the start of the cycle. It is the process of recording all transactions in a consistent way and is essential in
gathering the financial information needed to run a successful business.
It can include such things as:-
- Processing purchase invoices and receipts
- Producing sales invoices and chasing debts
- Payroll processing
Preparing financial statements (BAS, profit and loss, balance
sheet and cash flow statements)
Maintaining the general ledger is one of the most important areas
of bookkeeping. The ledger is like a filing cabinet, where a bookkeeper records the amounts from all sales and expense receipts. The
complexity of the bookkeeping task depends on the number of transactions completed daily, weekly, and monthly. More transactions mean more
complexity. All sales and purchases made by a business need to be recorded in the ledger, and all items need supporting documentation.
Accounting comes later in the financial cycle and is a high-level process that uses the financial data compiled by a bookkeeper to produce
Accounting can include such tasks as:-
- Preparing adjusting entries
- Reviewing company financial statements
- Analysing the costs of operations
- Planning for and lodging income tax returns
- Aiding the business owner in understanding the impact of financial decisions
A key part of the accounting process is analysing financial reports to provide a better understanding of profitability and cash
This is commonly called business advisory. Accounting turns the information from data into insights that reveal the bigger picture of the
business. Business owners often look to accountants for help with strategic tax planning, analysing their financial position, forecasting,
and tax lodgements.
In general, a bookkeeper’s role is to record transactions and keep you financially organized, while accountants provide consultation,
analysis, and advice on tax matters. Bookkeepers usually work with clients on a more regular basis. They keep the business finances ticking
over for the day-to-day activities. Often, accountants meet with their clients only a couple of times a year to interpret and act on the
financial data prepared by bookkeepers.
To confuse the issue further, the tasks that bookkeepers and accountants complete vary between businesses. Traditionally, bookkeeping
focused only on accurately recording and organising financial data whereas accounting interpreted and presented the data to business owners
and investors. But with the advent of cloud accounting, data has become more up to date and immediate giving bookkeepers the opportunity to
provide business owners with timely financial information that can be acted upon immediately. Business advisory in weekly chunks rather than
waiting until the next accountant meeting for analysis of historical data.
What it boils down to is, a successful business needs
- Someone to keep all the business finances up to date
- Someone to lodge BAS
- Someone to analyse the data to assist in financial decisions
- Someone to plan, prepare and lodge the tax return
If you are a business owner that can do all four well and run your business, go for it. If you need help, a bookkeeper can help with 1, 2
and sometimes 3 but not No. 4. An accountant can help you with 1, 2, 3 and 4 but it may be cost prohibitive having them complete
Your best bet would be to hire a bookkeeper and an accountant and have all three of you working together as an unbeatable team to power up
your business to success.
Thrive don’t just survive.