Effective management of your business finances is crucial for the growth and success of your enterprise. Seeking the assistance of professionals to handle your accounting, financial management and tax obligations is not only highly recommended but a ‘need to’. While the decision to seek help is straightforward, determining the specific type of assistance your business requires can be a complex decision.
It’s important to understand the distinctions between bookkeepers and accountants, as they perform distinct functions. By understanding these differences, you can make informed decisions about the level and frequency of support your business needs. Additionally, it is beneficial to be aware of the authority held by these professionals in relation to tax advice and filing.
What does a bookkeeper do?
Outsourcing bookkeeping services is a common practice among many businesses. A dedicated bookkeeper can provide invaluable attention to detail when it comes to monitoring the financial movement within your company. They act as a scorekeeper, keeping track of all financial transactions and turning them into organized and meaningful data.
The typical responsibilities of a bookkeeper include:
- Recording all financial transactions and assigning them to appropriate accounts.
- Handling the payment and issuance of invoices on behalf of the business.
- Verifying and documenting receipts.
- Preparing basic financial statements.
It’s worth noting that bookkeepers may be registered as a “BAS agent”, which allows them to perform certain services related to taxation, but if they are not, they will not be able to provide any tax-related services.
What does a BAS agent do?
A “BAS Agent” is a professional who holds a specific accreditation, allowing them to provide advice and manage your Business Activity Statement (BAS) on behalf of your business. They may be a bookkeeper or accountant who has obtained this accreditation. With this accreditation, they can provide guidance, prepare and file your BAS with the Australian Taxation Office (ATO) and communicate with the ATO on your behalf as needed.
The typical responsibilities of a BAS Agent include:
- Gathering receipts and invoices for the purpose of completing a Business Activity Statement.
- Preparing your BAS and filing it with the ATO.
- Communicating and working with the ATO on any disputes or correspondence related to your BAS.
To become a BAS Agent, an individual must have completed a “Certificate IV in Financial Services (Bookkeeping)” or “(Accounting)” from a Registered Training Organization (RTO) and successfully completed a course in basic GST/BAS taxation principles that is approved by the Tax Practitioners Board (TPB). However, it’s worth noting that BAS Agents are not authorized to complete income tax returns.
What does an accountant do?
An accountant’s responsibilities are more extensive than those of a bookkeeper. While a bookkeeper can be thought of as keeping score from the sidelines, an accountant is more like a coach, analysing and interpreting financial records to identify opportunities for improvement or potential issues. They may also perform the same tasks as a bookkeeper, but their expertise is best utilized in providing analysis and advice.
To legally provide tax-related advice and complete tax returns, an accountant must be registered as a “Registered Tax Agent”. If they are registered as a tax agent, they can also act as a BAS Agent.
What does a registered tax agent do?
“Registered Tax Agent” is a professional designation given to accountants who are registered with the Tax Practitioners Board (TPB) in Australia. These individuals are the only ones authorized to provide a full range of tax-related services, including the preparation of tax returns. To be eligible for this registration, they must possess the required qualifications in accounting and maintain an active registration with the TPB.
Bookkeeping involves a significant amount of detailed work, and a keen attention to detail is essential. In contrast, accountants typically use the data provided by bookkeepers to create financial statements and regularly review and analyse the financial information recorded by bookkeepers. They also conduct audits and make predictions about future business needs.
As a small business owner, it is important to understand which professionals will best meet the needs of your company. Determining whether you require the services of a bookkeeper or an accountant can be challenging, as their roles and responsibilities may overlap.
Consider hiring a bookkeeper for:
- Recording daily financial transactions
- Smaller inventories and less complex business structures
- A conservative salary budget, as bookkeepers generally earn less than accountants.
Consider hiring an accountant for:
- Monitoring and recording complex financial transactions
- Larger inventories
- If your budget allows for it, as accountants typically earn more than bookkeepers.
When should you outsource?
Uncertain about whether you should hire someone to manage your financials? Here are three situations that indicate it may be time to bring on a professional:
Complex taxes – If your taxes have become too complex to manage on your own, with multiple income streams, foreign investment, multiple deductions or other considerations, it’s time to hire an accountant. An accountant can save you time and ensure that you stay on top of important matters such as payroll, tax deductions and tax obligations.
Time-consuming accounting – If you find yourself spending too much time on accounting tasks and not enough time on growing your business or maintaining customer relationships, it may be time to outsource your financial management. An expert in accounting can help you focus on your growth prospects and increase your long-term revenue.
Business growth – While handling your own accounting may be manageable when your business is small, as it grows, it may be time to bring in additional help. You may start with a bookkeeper who balances the books monthly and an accountant/ tax agent who handles your taxes. As your bookkeeping needs increase, you may consider hiring a full-time staff member.
Whether you need a bookkeeper to handle day-to-day transactions or an accountant to provide analysis and advice, hiring a professional can help you stay on top of your finances and ensure compliance with tax laws.