What’s the Difference Between a Bookkeeper and an Administrator?

So as a business owner who may already have an administrator, you might be wondering why you shouldn’t just get them to do your bookkeeping. They’re taking care of the paper work, they may be responsible for ordering, issuing sales invoices and maybe even paying, or scheduling payment for, suppliers. These functions are perfect for an administrator to perform, especially when you’re not yet big enough to need dedicated individuals or departments for each of these functions. However, it all comes down to cost and who the best person for the job is. So what factors should you take into consideration when deciding whether to get your administrator to do your bookkeeping or not?

The Value of your Administrator

As your business has grown you’ve needed to hire an administrator because you couldn’t possibly continue juggling all the things you used to do. You needed to delegate tasks to a person that was more suited to it. It freed you up to do what you were good at. A good administrator, in time, will be far more efficient at doing the tasks you’ve delegated to them than you are, and they will be an invaluable member of your team. In many companies they’re the glue that keeps the business together.

The Value of Your Bookkeeper

A good bookkeeper is an accounting para professional with a very specific skill set. They’re qualified and experienced at bookkeeping, and often times associated functions such as payroll and HR, business systems and technology, credit control and financial reporting analysis. They know the correct way to classify transactions, they understand the impact of the entries that they’re making in your accounting software and they probably also know the correct way to process certain types of transactions in your accounting software. Without a thorough understanding of the software and accounting principles, it’s easy to make mistakes.

Good Data to Make Good Decisions

As a business owner with a growing business, you want to make good decisions to propel your business forwards. If you’re making decisions based on inaccurate financial data, then this really isn’t in your best interests. Some simple errors, repeated across the entire year, or even several years, can cause major inaccuracies and as well as money lost.

A couple of situations that we’ve seen that demonstrate this include a client who was double-counting his payroll expenses because the bank transactions for the payroll were posted to the wrong account. The client thought that he was breaking even that financial year, but he actually made a decent profit. He decided not to get any tax advice that year because he thought he didn’t need it. That ended up costing him some options to save tax. Another example is a client who had a mysteriously large amount of GST owed back to them, but neither us nor the accountant could figure out where it had come from due to the lack of accessible records going back over quite a long period of time. In situations like that, the opportunity to the claim the GST back is often lost.

The Cost of a Bookkeeper

It might surprise some business owners that hiring a professional bookkeeper is in all probability less expensive than using an administrator. Professional bookkeepers charge you either a fixed fee or an hourly rate, but there’s nothing extra to pay. No superannuation, public holidays, annual leave, personal leave, workers’ compensation insurance or payroll tax. In addition, you don’t need to pay for a desk, chair, computer, phone, rent for the space they use, lost time, (and costs), associated with training, supervising, managing, fixing their own errors, meetings, office chit-chat and various other activities. Very importantly, as they also don’t do this professionally, they don’t invest much time in investigating and trialling various technological innovations to improve accuracy and efficiency, they don’t usually have access to high-level technical resources and they most likely won’t have the qualifications and experience of a professional bookkeeper.

Do I Re-deploy my Administrator?

If you’ve got a full-time administrator who spends a couple of days a week looking after the finances, and you don’t have any way of re-deploying their bookkeeping time, consider engaging a professional bookkeeper to supervise the work and provide support to your administrator. The bookkeeper can rectify errors month by month and also teach your administrator a few things to assist them to reduce their errors in future. The professional bookkeeper can lodge your BAS and make sure that your financial reporting is correct, and that you’re informed of anything significant. Using this approach, you can minimise the amount of corrections needed at tax time, errors sneaking through and also reduce the amount of money that you’re spending with your accountant on matters of a transactional nature. Accountants excel at taxation and advisory services, and you’re getting far better value for money if you utilise their services for this skill set.

So Your Business is Taking Off?

If your business is kicking big goals, you might want a bookkeeper despite having an administrator that was previously handling your books so that you can avoid some of the unfortunate scenarios detailed earlier. We’ve met a few administrators that were grateful of being relieved of their bookkeeping responsibilities because they recognised that they weren’t suited or skilled for the task. Having a professional bookkeeper by your side when your business is growing can be an incredibly positive experience, as the value and insights you receive will be well worth the time you have invested in finding them.