Bookkeeper vs accountant: Which is best for small business?

Bookkeeper vs Accountant

If you’re trying to sort out your small business finances then chances are you’ve considered enlisting the help of a professional to get it right. But should that professional be a bookkeeper or an accountant? Or do you need both?

Before you decide, you need to ask yourself a couple of other questions. What’s the difference between a bookkeeper and an accountant? And which one is right for your business?

“A lot of people tend to think that bookkeeping and accounting are one and the same,” says Samantha Priday, Director of bookkeeping service Solving Accounts Matters, “and although we tend to work towards some of the same goals, our daily tasks can be very different.”

What does a bookkeeper do?

Bookkeeping is the process of recording a business’s daily transactions in a consistent way, explains Priday.

That can include completing payroll, recording financial transactions, producing invoices, maintaining and balancing subsidiaries, general ledgers and historical accounts, as well as posting debits and credits.

“A bookkeeper can play an essential role in the upkeep of a business to make sure everything is being run smoothly, bills are getting paid on time, staff are being paid correctly and IRD filings are completed in a timely manner,” says Priday.

She says one situation where a business owner may opt for a bookkeeper over an accountant is when they’re just starting out – the bookkeeper can help if the business owner has limited business finance knowledge or is too busy growing the business.

“A bookkeeper can help them keep records of their daily transactions in order to stay compliant, and then at the end of the financial year they may assign an accountant to help with tax filings,” says Priday.

Cost: Many bookkeepers will offer monthly retainer packages between five hours (about $250) and 40 hours (about $1500­-$2000). Generally, the more hours you require, the lower their hourly rate.

What does an accountant do?

An accountant takes more of a strategic approach to your business, explains Chris Mercer, Managing Director at MBP Advisors + Accountants, which also runs a bookkeeping service.

“We review, either on a bi-monthly or quarterly basis, everything that’s done by our clients’ bookkeepers. And we use that data to have strategic conversations with businesses about the trajectory of their cash flow or the way they’ve worked towards their business goals for the year,” he says.

“We also use that reliable data at the end of the year to produce official financial statements and tax returns.”

Mercer adds that accountants are generally going to be more highly trained in the area of tax compliance.

“That said, a bookkeeper also has to have a high degree of working knowledge in tax because they’re going to be doing the coding and classifying of transactions that will have an impact on GST and income tax,” he says.

Priday says small businesses generally consider enlisting the services of an accountant when they start employing more staff members, or need specialised reporting and analysis completed.

“An accountant can be very helpful when a business owner is looking to upgrade or improve how their business runs,” she says.

“The accountant will supply meaningful, relevant, reliable and accurate financial information that will allow the users of that information to make informed judgements and decisions.”

Moreover, accountants are generally across directors’ duties and can advise you to seek legal advice if and when necessary. There can be serious consequences for things like not paying PAYE and an accountant can alert you to such matters.

Cost: Accounting firms may charge a fixed monthly fee for their accounting services, generally ranging from $100 to $400 per month, or a casual rate between $100 and $300 per hour.

So do I need both?

To answer this question, David Waine, CA, Director at Matley, suggests thinking about bookkeepers and accountants as different types of cars.

“You have your small runabout car for day-to-day chores, dropping off kids, doing the groceries, et cetera,” he says. “And then you have your large family car for taking on long road trips. The small car is a Toyota Corolla – compact, reliable, economical. The larger car is a Toyota Landcruiser with all the bells and whistles to meet the needs of long trips.

“Your bookkeeper is the Corolla. It meets your day-to-day needs, helps you enter details into your system, steers you through the labyrinth of record keeping, collating and recording, and produces a solid set of financials every week/month. Then quarterly or when needed, the accountant (Landcruiser) comes in, and spends an hour or two looking over the numbers and assisting in getting the direction you need in your business for the long-haul trip.”

The key, says Waine, is to ensure you select the right professional at the right time to help you on the different stages of your journey. Ideally, bookkeepers and accountants work together to meet your different business needs.

In the case of managing cash flow, for instance, an accountant can assist with structuring budget planning and growth opportunities, while a bookkeeper can help with securing prompt invoice payments and tracking short-term cash flow forecasts.

Mercer recommends checking that the bookkeeper is a member of The Institute of Certified NZ Bookkeepers (ICNZB). You can also search for a bookkeeper near you on that site.

To find an accountant near you visit The Accountants and Tax Agents Institute of New Zealand (ATAINZ) or the New Zealand Chartered Accountants (NZ CA).

This article was originally published in 2020 and has been updated with new insights from interviewees.

Talk with a specialist from Prospa about how a Prospa Line of Credit can help you boost your cash flow and make business happen this tax time.

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