Accountant vs Bookkeeper - big difference
There is a significant misinterpretation and misunderstanding between the role of a bookkeeper and that of an accountant. If you don’t know the difference it can negatively impact upon you (possibly seriously). But if you understand each role and utilise them appropriately, it can be very helpful for your business.
Mistaking a bookkeeper for an accountant can lead to poor advice, which can be very detrimental to your tax position. We’ve seen cases where the wrong advice resulted in taxpayers paying significantly more tax than they needed to. Even worse, we’ve had new clients come to us who were in strife with the IRD because they had paid too little tax, on the advice of a bookkeeper. On the other hand, using a qualified chartered accountant for bookkeeping work would be unnecessarily expensive.
If previously the duties and responsibilities of the two could slightly overlap, these days their roles are more distinct than ever before. While each role has its place and both are beneficial for business owners, it is important to understand the difference between the two and what each can provide. Bookkeepers
When a person starts a new business, they are focused on dealing with customers, vendors, suppliers and employees. They are working really hard to make the business successful and to generate revenue.
They don’t have time to deal with documents and paperwork. However, they do need to keep track of how much money is coming in and going out of the business (i.e. cash flow). The faster the business grows, the more work is required from an administrative point of view, which is time consuming for business owners.
This is where a bookkeeper is absolutely irreplaceable. Their role includes accurate recordkeeping, classification of daily transactions, processing invoices, receipts, payments, reconciliation of accounts, preparation of reconciliation reports, managing accounts receivable and accounts payable, and maintenance of financial records.
These are the core responsibilities of a bookkeeper. This role requires attention to detail, understanding of accounting systems, ability to work with spreadsheets and databases, and the ability to work effectively with accountants – all of which are the essential skills needed to produce accurate and reliable data. Accountants
Once the above data is produced, an accountant can now take over in order to convert this data into usable information. An accountant’s role is to analyse, review, verify the accuracy of data presented, interpret the financial information, and present various options to clients for consideration and decision-making purposes.
This role is advisory and analytical in nature and very different to a bookkeeper’s role. The accountant’s focus is on taxation advice and planning, as well as business assistance, all of which are supported by the data prepared by the bookkeepers.
A trusted accountant is always there for their clients, and in a perfect world the client would contact their accountant before entering into any financial transaction or making any decision.
While an accountant will also be qualified to assist you in areas of bookkeeping, it is important to be aware that there is likely to be a substantial difference in fees charged by bookkeepers and accountants. Accountants and bookkeepers working together
Effectively working as a team, bookkeepers and accountants will achieve the best outcome for their clients, serve the financial requirements of their business, and will result in the most appropriate business decisions. However, you need to make sure both your bookkeeper and your accountant are good at what they do!
We had an example where a new client to GRA really loved their bookkeeper, had used them for over five years and they even had some common interests, so they felt more like friends. However, the bookkeeper was not able to provide quality data, due to not having sufficient experience in that type of industry and the inability to ask for help when needed. This resulted in incorrect data and financial statements, and a few poor business decisions.
We advised our client to change bookkeepers (as personally uncomfortable as that may have been) and as soon as they began working with an expert bookkeeper it became clear to them how important good quality data was. By producing good quality data and working together with their GRA accountant, they finally had a chance to make some good decisions, and the business performance improved significantly. Summary
There is a place for both bookkeepers and chartered accountants. If good bookkeepers and qualified accountants work together, clients can achieve the best results for their businesses. However, mistaking a bookkeeper for an accountant can end up being very costly and detrimental to the business. Conversely, using a chartered accountant for bookkeeping tasks is an expensive way to go about things. Make sure you choose the right person for each job, and that they are appropriately qualified to carry out their respective roles.