When it comes to finance, you likely fall into one of two camps. Either you’re on top of every detail, know exactly how much cash you’re earning, and how to do your tax returns. Or on the other end of the scale, you could be struggling to keep up, whether that’s because of a lack of time or a limited understanding of what’s required.
Without careful management of aspects such as income and expenditure, you may be unable to produce the accurate reports that you need to supply to the government, let alone make good business decisions.
A lot of self employed workers or small business owners choose to outsource their financial administration, in order to make sure that they are doing the paperwork correctly and remove the stress of late nights, surrounded by receipts. However, it can be hard to know which type of professional is right for your needs. We take a look at the differences below.
What does a Bookkeeper do?
- Ensures accurate record keeping
- Manages income
- Pays business bills
- Prepares taxes for accountant
- Tracks expenses
A bookkeeper will take care of your everyday financial transactions. Whereas most people only see their accountant once or twice a year, a bookkeeper will work with you on a very regular basis so that they can keep track of your income and expenditure. It is this attention to detail that will help keep you on track, as any issues are easier to nip in the bud the earlier they are detected. Experts say it’ll only cost you around $35-$60 per hour depending on the size of your business.
If you are self-employed, managing without a bookkeeper means that it can be difficult to keep up with the invoicing of your clients, while also trying to run the day to day side of your business. So, a bookkeeper can reduce the time and hassle associated with such tasks.
All of your bookkeeper’s efforts work towards handing everything over to your accountant at the end of the tax year. Unless your accountant receives clear, detailed and accurate reporting, they will be unable to file your taxes. Plus, finding tax deductions is made far more difficult without good bookkeeping, meaning you could lose out on valuable savings.
A point to note is that bookkeepers are not as experienced as accountants. Technically, anyone can call themselves a bookkeeper, though usually they will have some form of qualification.
What does an Accountant do?
- Analyse accounts
- Audit financial information
- Deal with insolvency
- Ensures compliance with the law
- Financial forecasting
- Prepare tax returns
- Prepare budgets
- Profit and loss statements
- Tax planning
Accountants are experts at analysing complex financial data. Their aim is to ensure your finances remain healthy. This is achieved through cash flow forecasting, budgeting and auditing.
Most people associate accountants with the filing of tax paperwork. But as well as filing your tax documents, accountants can also seek out tax savings related to your expenditure, meaning their services may actually save you money. Accountants can also help you plan for your tax bill so that you are able to pay it in full and on time, without putting strain on your finances.
Accountants also ensure your business remains compliant with the law. For this reason, accountants require professional qualifications, such as becoming a Certified Public Accountant. To be a CPA, a person must fulfill certain criteria, such as holding a bachelor’s degree, and having at least two years of public accounting experience. These qualifications are far more in-depth than bookkeeping, and the individual may also be registered with a professional independent body.
To sum up
On a basic level, bookkeepers will note transactions relating to your business, ensuring the records are documented in a legible fashion. If you require more comprehensive financial services in addition to help with your tax, then an accountant is the best person to consult.
Keep in mind though that without regular bookkeeping, your accountant may struggle to interpret your financial data. That is why the foundation of all business accounting begins by making your bookkeeping a priority.
Ultimately, it may well be the case that your business would benefit from the input of both a bookkeeper and an accountant. While there are some similarities, be sure to remember that both bookkeepers and accountants offer different services, and it’s important to find someone who you can work in partnership with.