So often, business owners come to us confused, not sure if they need a bookkeeper or an accountant to help handle their small businesses’ finances.
We completely get this - as professionals in both areas, of course, we know the difference. But to business owners whose area of expertise lies elsewhere, we can see how in the throes of business, these nuanced differences between accounting and bookkeeping can be misinterpreted.
Knowing the difference between the two is vital because it might lead you into hiring the wrong person for your business or committing to an arrangement that’s not suited to what your business needs.
The key differences between accounting & bookkeeping:
At a high level, the key differences between accounting and bookkeeping can be seen as follows.
Bookkeeping serves the purpose of accurately recording and organising all the financial data within your business. Accounting serves the purpose of interpreting and presenting this data in a way that supports key financial decisions for business leaders, investors, financial advisors and anyone who has responsibility for the business's performance.
Now, to break this down even further, it might help if we list the type of tasks that are typical of bookkeeping and accounting.
- Organising receipts and bills
- Recording business transactions
- Financial statements and reports
- Analysis of business performance and key recommendations
- Tax management
Can bookkeepers handle my accounting as well?
It’s common for business owners to expect their bookkeeper to handle their accounting as well. Often, bookkeepers are cheaper than accountants and will happily take on the extra work. However, this can be a slippery slope…
The qualifications required to become a bookkeeper are different from becoming an accountant. As we highlighted above, they’re two different jobs. One isn’t better than the other, they simply handle two different core functions of your business's overall financial performance.
If your bookkeeper is also a Chartered Accountant (CA), then you can be confident that they have the knowledge and experience to provide you with financial advice that’s sound. To get your CA, you need relevant tertiary education with at least three years of hands-on accounting experience. The team at Accolution all hold CAs, and we find that’s been a vital aspect of our client's financial success.
When is the right time to seek financial expertise in your small business?
Business owners usually come to us with a growing business that’s running them off their feet. For sure, hard work is important in growing a business, but there comes a time when working all day, only to go home and spend more time on managing the books and overall finances of your business becomes too much.
In these situations, the bookkeeping is often neglected, which then hinders the accuracy of the business's key financial data, which then hinders the strength of the important decisions that need to be made from this data.
It’s a downward spiral that just creates more stress and turmoil. I think we can all agree that running a business is hard enough. So, in light of this, we suggest that the right time to seek financial support in your business is as early as possible, right from the start is even better!
Yes, the expense might be stretch. However, this is a flawed way of thinking. In almost every client we deal with, not only do we free them up hours to spend more productively in their business, but we also empower them to make stronger financial decisions that increase revenue, manage expenses and stick to a defined budget.
They sleep better at night and show up as better business leaders day-to-day.
Let’s wrap things up:
Within your business, a bookkeeper serves the purpose of recording and organising all the financial data within your business. An accountant serves the purpose of interpreting and presenting this data in a way that supports strong financial decisions within your business.
If you are going to get your bookkeeper to help with your accounting, it’s best that you check they have their CA. You don’t want the person making very important financial decisions on your behalf to not know what they’re doing.
And lastly, we strongly suggest that you seek financial expertise within your business as soon as you can. Not only will your business be more financially sound in both the short and long term, but personally you will also have more time to focus on what you do best, all the while carrying a little less stress. We’d like to say no stress, but we’re bookkeepers and accountants, not psychologists…
On that, if you would like some help with your bookkeeping, accounting or both, be sure to send us a message below. We are based in Adelaide but work with small businesses right across Australia remotely.
Dan is a Chartered Accountant and the founder of Accolution. He loves helping his clients succeed in business and specialises in working with small businesses looking to break through the ceiling of their next stage of growth.