Almost every week I am asked “Do I need an Accountant or a Bookkeeper?”
Often I say “You need both” and here is why.
Operating a business requires having a well-organized system for the financial records. Financial information plays a vital role in the success of a business because apart from compliance it is the financial information that that is used for decision making. It’s very important to hire someone who is fully competent to prepare your financial information.
In a question of who is to be hired, a question arises when choosing between an accountant or bookkeeper. To help make this decision, let’s start by understanding: Why does my business need an Accountant or Bookkeeper?
The Role of Accounting in a Business; “Taking care of The Numbers”
As a business person you are probably most interested in the 2 main aspects to the Accounts:
- Compliance and
- Management accounting
Compliance. The ATO and the government have established regulations and rules regarding the financials of a business; about keeping track of the money coming in and the money going out. Individuals and businesses need to comply with the regulations. This is often referred to as Financial Accounting.
Compliance is about accurately recording the financial transactions; the money in and the money out so that both the business and the individual meet their compliance obligations.
Compliance is about completing BAS annually, quarterly or monthly.
Compliance is about preparing and lodging Tax returns for Individuals and Businesses, as well as Trusts and Corporations.
The second aspect is the interpretation of the financial information and this is often referred to as Management Accounting. What is the story that is being told about the business through the financial reports?
When you are operating your business on a day to day basis you will need to:
- Record your financial transactions
- Reconcile your accounts; bank accounts, credit cards, general ledger
- Issue invoices and manage debtors
- Record invoices and manage creditors
- Produce regular financial reports; weekly, monthly
Who could do these things?
You could do them yourself and I see many Startups and Small Business people doing all their own accounts. Don’t do this because it is not worth your time and creates a false sense of comfort.
The only reason you would do your own accounts is if you have just a few transactions a month and then you would use our Healthy Numbers Expense and Income Tracker
As soon as you start your business it is time to start looking for a Bookkeeper and an Accountant.
A skilled Bookkeeper could do any or all of these activities depending on their level of skill and competence.
An Accountant could do any or all of these activities although is less likely to do so.
Want to read more:
The difference between what an Accountant does and what a Bookkeeper does