If you’re a small business owner, you’ll be familiar with wearing many hats.
As well as keeping things running, you need to generate income, keep your customers happy and look after financial information. Tracking the financials can be a chore though, and one of the biggest questions you might have is who you get to help with your accounts. Do you need an accountant, a bookkeeper or both? Let’s demystify things.
Bookkeepers and accountants have different jobs and responsibilities. An accountant’s main focus is:
- The preparation and lodgment of statutory returns
- Advising on legal entity structures
- Giving general business and financial advice
Accountants are usually members of a statutory association. Qualified and registered accountants might call themselves CPAs (Certified Public Accountants), CAs (Chartered Accountants) or other titles, depending on the country.
Bookkeepers can manage lots of different responsibilities within a small business. But the main focus is the organisation, recording and reporting of financial transactions as part of the operational life of a small business. In more recent times, some bookkeepers have extended their range of duties to include:
- Training clients to use accounting software
- Implementation of document management and inventory control processes to create efficiencies within the business
- Implementation of POS (point of sale) systems that capture the daily transactions in a retail environment.
- Develop, implement, maintain and review internal business processes
You will often find that a bookkeeper has an area of specialisation and it’s a great idea to ask them more about this when you are looking at hiring them for services.
A full breakdown of what bookkeeper can do:
If your business is small, you might be the bookkeeper – at least until you can afford to hire someone to do the work for you. Once your business reaches a certain size, it makes sense to have someone do the bookkeeping for you. Here are five ways that a bookkeeper can help:
1. Keeping track of daily transactions- A bookkeeper can handle the recording of day-to-day bank transactions. If the accounting software you use has daily automatic bank feeds, this is a great tool for your bookkeeper to use. When your bank statement lines are fed into your accounting software, it’s much easier to keep an eye on cash flow and it also saves on data entry time.
2. Sending out invoices and managing the accounts receivable ledger- Preparing invoices and sending them to clients is usually the bookkeeper’s responsibility. Managing the accounts receivable ledger – and chasing late payment – is also likely to be done by a bookkeeper.
3. Handling the accounts payable ledger – Up to a certain dollar amount, it’s usually bookkeepers who will make payments on behalf of the business. This includes payment of supplier invoices, expenses and petty cash.
4. Keeping an eye on cash flow – One of the most important tasks for a bookkeeper is making sure the company doesn’t run out of day-to-day money. They can do this by watching the balance of revenues to expenses. Then they can take action or offer advice if it looks like the company needs more ready cash.
5. Preparing the books for the accountant – It’s the bookkeeper’s job to ensure that the accounts are valid and up to date when the accountant needs them. This allows the accountant to use their skills and knowledge to make business recommendations, report to the board and complete company tax returns.
In summary, it’s the bookkeeper who does the day-to-day work so that the accountant can concentrate on strategic financial operations. So bookkeepers play an important role – without them, accountants can’t do their jobs.
That’s the key differences between a bookkeepers and accountants.
Bookkeeping helps your business run smoothly
Bookkeeping is a vital job in any business. This is true whether you do the work yourself or hire someone to do it for you. Without proper bookkeeping, your accounts will not be accurate. That means your accountant won’t get a clear picture of your company’s finances and you can’t make strategic business decisions.
Just as importantly, your business has a legal obligation to accurately record its accounts and file company reports to the tax office. So it pays to get this right. Bookkeeping will help you do all of this – and will also provide you with useful insights into the financial health of your business.
Of course, there’s a difference between good bookkeepers and not so good bookkeepers. We’ll help you see the difference.