Have you ever wondered why business owners have a bookkeeper and an accountant? Why both? Why not get the accountant to do the bookkeeping? And what’s the difference between a bookkeeper and an accountant anyway?
To put it in simple terms, bookkeepers take care of the micro and accountants take care of the macro.
Firstly, bookkeeping and accounting are completely different skills sets with different qualifications and different experience requirements. There is of course some overlap, as both professions deal with financial transactions. Both professions require at least basic accounting skills.
You could easily make the mistake of thinking that bookkeepers are under-qualified accountants/Tax Agents. In some respects, that is true. But it would misrepresent reality because they actually need different skills. A good Tax Agent may not make a good bookkeeper, unless they’ve learnt bookkeeping just as a good BAS Agent may not make a good Tax Agent unless they’ve learnt that skill set.
Bookkeepers record financial transactions. They handle the day-to-day. It could be entering your purchases, reconciling your bank accounts, chasing your customers for payment or figuring out why a supplier is chasing you for a bill you think you’ve already paid. A good bookkeeper understands accounting principles, how to record things correctly, the intricacies of payroll, probably knows your chosen accounting software inside and out and would be able to guide you through the maze of compliance requirements that you face as a business owner. You need your bookkeeper all year around, possibly on a weekly or even a daily basis.
Accountants look at the sum total of the individual transactions that a bookkeeper has entered. They do look for errors in the transactions, but they don’t generally enter transactions. They analyse figures over a period of time and make tax decisions and provide strategic advice. They need to understand accounting standards. They also provide advice and guidance to bookkeepers about the specific ways that certain types of transactions need to be treated, given your unique set of circumstances. You’ll need your accountant at least annually, but possibly even quarterly or monthly, depending on how much advisory work you’ve requested.
Then there’s hybrids. Some people with tax accounting experience and qualifications offer bookkeeping services because that’s what they enjoy doing, and they’re good at it. You’ll also find bookkeepers who might have a degree and experience in corporate accounting offering a supercharged version of bookkeeping, which provides some of the analytical services that Tax Agents offer, without offering any tax advice.
What You Should Use Your Bookkeeper and Accountant For
So other than the difference in qualifications and experience, there’s a big difference in price. Your average bookkeeper will only charge about one third of what an average accountant charges. Given that you need bookkeepers far more regularly, that’s a good thing! You are far better off getting your bookkeeper to do everything that they are skilled and licenced to do, as you’ll get better bang for your buck. A great bookkeeper will even make a point of directing you to your accountant when they know that you need their advice. If you follow this model, your entire bookkeeping/accounting budget can be put to better use, as the money you’re saving by getting your bookkeeper to handle the basic accounting and analytical work can be put towards more high-level, strategic advisory services from your accountant.