How is a bookkeeper different from an accountant?

Although bookkeepers and accountants both work with financial data and are both essential for managing a successful business, their roles and duties are actually different. Both play an important part in keeping a business’s finances on track and helping business owners grow their business, but they each cover different aspects of business finance. 

If you’re like many business owners, you may not be exactly sure of the differences between a bookkeeper and accountant - and whether you should hire one or both. 

An established, growth-focused company will employ the services of both an accountant and bookkeeper. The two professionals work in tandem, to ensure business financials are up to date and accurate, and the financial health of the company is carefully monitored.

Many business owners attempt to do the bookkeeping and accounting themselves, especially in the early days of their business. While this seems like a smart, cost-cutting measure, in the end it can wind up costing even more money than hiring professionals to keep the business compliant and set up proper processes from day one.

A look at bookkeeping for small business

The primary role of a bookkeeper is to handle a company’s day-to-day financial activities. A bookkeeper will take care of the small but important details that are essential for providing an accurate picture of where a business stands at any given moment.

Generally speaking, bookkeepers track and manage:

• Data entry, such as recording financial transactions

• Balancing books

• Bank reconciliations

• Monthly reports

In addition to a bookkeeper’s main tasks they may also lend a hand with other key tasks such as invoicing, paying suppliers and vendors, and processing payroll. With much accounting and financial information kept online these days, many bookkeepers also offer virtual services, such as setting up a company’s tech stack, implementing it, and training staff in using it properly. 

Ideally a company’s books are updated at the end of each business day, so you always have a true account of your sales, expenses, and the bottom line. If your business is still in its early stages, however - without a lot of financial activity or the funds to hire a bookkeeper – you should aim to reconcile your own accounts at least once a week.

Why you need an accountant

An accountant’s primary role is to help companies make sense of their numbers for the purpose of strategic planning - they review, interpret, and report on financial data in order to provide “big picture” business advice.

As a small business owner, you’ll want to work with an accountant from very early days to help with budgeting, forecasting, and decision making – as well as for strategic tax advice, and identifying opportunities to reduce costs and increase profitability. 

Many business owners think they only need to talk to their accountant once a year, at tax time. But in order to be able to truly gauge the health of your business - and make the most of your accountant’s expertise - it’s recommended you check in at least once a month.

Your monthly meeting is a chance to review key reports, like your profit and loss statement, discuss opportunities or areas of concern, and get timely advice to help meet the goals you’ve set out in your annual business plan.

Accountants can also

• Advise clients on the best business structure

• Set up business processes

• Issue and track invoices

• Record sales

• Manage and pay supplier invoices

• Prepare tax returns

• Manage payroll

• Create financial reports

As with bookkeepers, many accountants offer virtual services and can help their clients set up virtual financial systems and processes that meet their needs. 

Final thoughts

As your business grows, it’s essential to have trusted financial professionals managing your books and providing strategic financial advice. 

After all, the busier you get, the more complex financial management becomes - and the less time you’ll have to maintain your books and try to make sense of all the data. 

A trustworthy bookkeeper’s services are essential for a thriving business, and an accountant can do so much more than handle your taxes. Think of both as being trusted business partners - people whose services you rely on year round for accurate information and advice on achieving your business goals. 

If you're a Wellington small business owner looking for an accounting then we’d love to hear from you. Contact us for a no-obligation chat.

Affinity is a Wellington accounting, tax and advisory firm serving clients across New Zealand.