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The terms “Bookkeeper” and “tax accountant” are common terms used in the realm of fiscal management and reporting for business, and often, small business owners can get confused as to the difference between the two. Whilst there is some overlap with the roles and functions of bookkeepers and tax accountants, they both play very different roles in your business.
Having a clear understanding of the distinction between the two roles can help you to maximise the benefits that both bring to your business, saving you time and money and helping you to make informed financial decisions. Let’s take a quick dive into the key differences between a bookkeeper and a tax accountant, what the two roles generally entail and when it makes sense to engage one over the other to support your small business.
A bookkeeper is primarily responsible for the day-to-day management of the financial records for your business. They oversee the recording of transactions, invoicing, organising and filing receipts, tracking expenses and reconciling bank accounts. The bookkeeper is responsible for ensuring that your internal records give an accurate reflection of the cash flow in your business. When your bookkeeping is done correctly, you can identify cashflow issues early, and you are empowered to make sound financial decisions.
Most bookkeepers are well versed in most accounting software programs, such as MYOB, QuickBooks, and Xero, and those who have been around for a while often have had some exposure to some of the more niche accounting software programs. By engaging a bookkeeper who is familiar with the accounting software that your small business uses, you can save time and money, as they are using these programs on a daily basis and are aware of the individual nuances of the programs.
A good bookkeeper should keep on top of the accounting file for your small business, reconciling accounts regularly and maintaining clean and accurate records, ensuring that reports can be run at anytime and making the preparation and lodgement of Business Activity Statement (BAS) and tax returns a smooth and straightforward process.
A tax accountant, on the other hand, handles the more ‘high-level’ financial reporting obligations. They are better qualified to consult on business structure and set-up, and to keep you compliant when it comes to business and tax laws. Your tax accountant is also responsible for the preparation and lodgement of company tax returns and is well versed in the management of BAS, PAYG, Superannuation and GST for your business.
When it comes to complex tax matters and tax- minimisation strategies, your accountant is your first point of call. The role of tax agent is a strategic role, helping you make informed decisions that affect the structure, growth and tax position of your business.
Whilst both bookkeepers and tax accountants are engaged to work with your finances and reporting, their roles are very different. Bookkeepers are engaged to deal with the day-to-day running of your business in an operational capacity. Tax accountants, however, are engaged to step in at a higher level less frequently. They are called upon in a strategic capacity to guide big decisions and to ensure compliance with taxation laws.
Bookkeepers are most commonly engaged on a weekly or monthly basis, keeping you up to date and working on your company file regularly, whereas it is not uncommon for accountants to only be called upon on a quarterly or annual basis when it comes time to prepare and lodge BAS or tax returns.
The other key difference between bookkeepers and tax accountants is their level of qualification. Typically, bookkeepers hold certifications in accounting software and financial administration, whereas accountants hold formal accounting qualifications and are most often registered with the Tax Practitioners Board.
The need to engage a bookkeeper vs a tax accountant changes based on the phase of business that you are in. When you are just starting out, and perhaps acting in a sole-trader role, having a bookkeeper on board is helpful in setting up your systems, such as MYOB or Xero and making sure that your documentation is clear and correct. Having a bookkeeper on board from the outset help you to ensure your reports are accurate and that your business transactions and personal transactions are kept separate from the get-go. Your bookkeeper can set up your company file so that your invoicing and receipting is integrated and can help you manage the day to day side of things.
As your business grows, the volume of transactions generally increases, and company structures may come into play, as might the purchase of larger-ticket items such as company vehicles and infrastructure. Bringing a tax accountant into the conversation at this point can help you ensure you choose the right structure for sustained growth and can also help you with tax efficiency when it comes to these bigger purchases. In the growth phase, even having a one-off consultation with a tax accountant can set you up for success with regard to quarterly tax planning and reviewing your deductions.
As your business matures, you may find the need for more long-term planning and structuring, and your reporting requirements may become more complex. Having a good bookkeeper who is on top of your books ensures ongoing accuracy and compliance, whilst your tax accountant will assist with issues such as structuring, planning and preparation of financials for applications for finance and grants when required.
In our experience, most businesses benefit greatly from having a hybrid solution. Whereby you have both a bookkeeper and a tax accountant on board. Businesses who are growing and seeking funding, planning for expansion or trying to streamline processes will require both high-level strategic consultation as well as accurate and up-to-date records.
When it comes to choosing your bookkeeper or accountant, experience is key. Ensuring that they are familiar with your accounting software will save time and money for you, and having had experience in your industry will also help when it comes to taxation laws and industry specific factors that come into play with regard to deductions and structuring. Communication styles and avenues are also important in that you want to be sure that you can get in touch when you need to and that the work can be done in a way that suits your business.
Of particular importance, though, is certification and insurance. Engaging a bookkeeper or tax accountant who does not have adequate qualifications or insurance leaves you at risk of loss, whereas engaging professional accountants who are highly qualified and adequately insured gives you peace of mind that your business is in safe hands. If you need help staying on top of your finances or making informed decisions at tax time, Darcy Bookkeeping and Business Services offers both bookkeeping and tax accounting to give you the right support. If you’re unsure where to start, reach out to us at Darcy Bookkeeping and Business Services or call us on 1300 728 875 and book a consultation.
Neither is ‘higher’ or ‘lower’ than the other, however their roles and responsibilities differ. Accountants typically require more formal qualifications and can offer tax advice.
An accountant can lodge tax returns, give strategic financial advice, and ensure compliance with the ATO. Bookkeepers handle the day-to-day record keeping.
Bookkeepers manage daily transactions and reconciliations. Accountants handle higher-level tax obligations, compliance, and business advice.
