What is the difference between an accountant and a bookkeeper?
Do you need to hire both for your small business? Or is an accountant adequate for a small business?
Bookkeepers perform a vital function for business owners, making sure their accounts are correct and helping them manage their finances. Accountants can generally do all that a bookkeeper can, but the accountants who create real value for their clients are the ones that don't just make sure the expenses are in the right column. They help their clients from a strategic perspective, leveraging the financial knowledge and taxation knowledge to assist with cashflow, debt management, business growth strategies, asset protection, taxation savings and more, all whilst having one eye on the lifestyle that the client desires.
bookkeepers provides the business accounting function that the business owner would have done before the business grew and employed staff. the bookeeper acts as the 'steward' of the business, ensuing sales accounts are sent out, debtors are followed up and creditors are paid.
an accountant however, fulfills a compliance role at the end of each financial year, in submitting a company's financial / tax situation to the tax agent (ird in nz). while some progressive accountants also provide some business growth idea's and strategies to businesses, this tends to be a minority skill set amongst accountants.
Top question Phil
This is what I think:
Bookkeepers process all the financial crap that gets thrown at you constantly when you're running a business, all the invoices from other people, all the invoices you issue yourself and they somehow automagically transform it into intelligent data, ie Profit and Loss and Balance Sheets. They usually talk about MYOB and Quickbooks and about reconciling bank statements and talk about BAS statements.
Accountants like to look down on bookkeepers as doing the 'dirty work' and get off on the fact that their role is much superior. Accountants LOVE to take the 'stuff' that bookkeepers produce and waste a whole stack of time putting it into their own accounting systems to produce their own set of financial statements. The accountants will tell the business owner their financial statements are better, are 'correct', and will boss the bookkeepers around to make 'adjustments' to their MYOB/Quickbooks files. Most accountants don't like this 'process work' and instead prefer to talk about more 'important' stuff... like tax.
In contrast, there are some accountants that have woken up to the fact that we're in the 21st century and that software has evolved to the point where both of the above roles are becoming more and more redundant.
Awesome accountants will help set you up with the awesome technology that can give you clean, effective, up-to-date financial information at your fingertips.
Then once that's sorted, they also make sure your tax compliance is on lock. And they also love to advise on broader financial strategy and wealth creation.
Hope that helps Phil.
Hit me up on @mlr_ca if you have any other accounting questions.
Bookkeepers are not qualified accountants but may have a business degree background or completed a bookkeeping course. They generally perform transactional-based processes such as accounts payable and receivable, bank reconciliations, some basic accounting and reporting, BAS tax reporting, back office administration. They don't normally provide technical advice (nor should you rely on them).
There are degree qualified accountants (Business Degree) and professional accountants (Post-degree qualified) with designations such as chartered accountants (CA's) and certified practising accountants (CPA's) etc. This requires further stringent training, studies and professional work experience. CA's & CPA's provide amongst many things - technical advice, strategic advice, tax and business planning, auditing, financial & performance analysis, management & financial reporting, compliance, funding, cash flow & asset management, higher level professional advice. They generally don't perform the bookkeeping functions as it would be too costly for you but they review their work for accuracy & can complete your annual or monthly accounts based on the work they have done and explain to you what the results mean from a performance perspective & offer recommendations of how the business can be improved and meet your expectations. You can use external accountants to do your annual tax returns, accounts/financial statements, BAS etc or you can hire one internally that can do this in-house and help shape and grow your business.