Accountants vs bookkeepers for small business: what’s the difference?

If you’re reading this, then chances are you recognise the importance of having your finances in order, and in ensuring you’re compliant when it comes to tax and other small business-related obligations.

The shift from employee to business owner – and potentially employer – means there are a number of things to be aware of in this space, however navigating it all can be a little daunting.

This is where accountants and bookkeepers are able to lend a hand. But while they both perform valuable roles and can support you and your business in a number of ways, their specialisms are quite different.

Bookkeepers keep your finances in order, ongoing 

A bookkeeper is someone you will likely want to work with on an ongoing basis. They request bank statements relating to your business account on a monthly basis (and the relevant receipts or invoices), and use this information to prepare monthly management reports for you.

The P&L and balance sheet

These reports include two key items: your profit and loss statement (P&L) and balance sheet. The P&L contains data about all of your incomings and outgoings for the month – things like payments you receive for selling or providing your products or services, and the bills you pay in order to operate the business, such as those related to rent, electricity and subscriptions.

On the other hand, your balance sheet is what I call the “holy grail” because it includes information about your income, expenses, assets and liabilities. It provides accurate representation of the financial well-being of your business so that you can make informed investment decisions.

Tax estimates and BAS

Tax is a big one to be aware of. As a small-business owner, it’s important to put money aside for GST (if you earn over $75,000 per year, the government requires you to register for this) and income tax. Some (but not all) bookkeepers may also provide you with tax estimates detailing what you owe, usually on a monthly or quarterly basis, as well as prepare and submit quarterly business activity statements (BAS) for you. 

Accountants: the tax time experts 

Accountants are a must when it comes to tax time, which falls on 30 June each year. If you’ve been working with a bookkeeper, they will prepare your end-of-year accounts so that you can take them to your accountant in an organised fashion.

The accountant will then analyse the data that’s included in these documents to prepare your tax returns, provide advice around what you can and cannot claim as deductions for the business, and lodge the tax returns to the Australian Taxation Office (ATO) on your behalf.

If you don’t choose to work with a bookkeeper, it is possible to keep your numbers in order yourself and take these reports to your accountant annually. Alternatively, they can also prepare these end of year reports for you, however, their fees can sometimes be higher than those of a bookkeeper – particularly as they’ll be tasked with analysing a year’s worth of transactions (which can be a headache for you too, if you’ve not kept track of your receipts!).

Structural analysis and advice

Accountants also provide planning support to ensure your business is tax efficient in its structure. This means things like registering the business with the government on your behalf and providing advice around the best model for your business, such as whether taking the trust route is the right option or not.

The difference, summarised

As you can see, it’s important to look to the support of both a bookkeeper and accountant. A bookkeeper keeps your finances organised throughout the year, meanwhile, accountants prepare and lodge your annual tax returns, and can provide sound advice around your business model to help you grow and succeed.