Despite the fact that they are both financial services, there are considerable differences between accounting and bookkeeping. However, they are both critical roles in any organisation, so it's important to understand how they work together. Read on to learn more about the responsibilities of bookkeepers and accountants as well as the differences between them.
What Is Bookkeeping?
Bookkeeping is the process of keeping track of your transactions in order to maintain accurate records of your incomings and outlays. Regular financial reporting is required so that you have a better understanding of the financial situation at your company, which will help you to make better business choices and complete the essential tax filings and reports.
In addition to inputting data into a company's financial software, bookkeepers are also in charge of balancing control accounts as well as doing double-entry bookkeeping. This information gives you accurate and up-to-date fiscal data about your company.
Typical Tasks Performed By Professional Bookkeepers:
Processing invoices, receipts and bills
Processing and maintaining payroll systems
Recording business transactions
Managing your accounts payable and accounts receivable
Preparing and lodging your Business Activity Statements (BAS)
Providing daily/weekly/monthly financial information regarding the standing of the business.
Advising on appropriate software systems, and setting those systems up for your business
Assisting you in ensuring you have the best systems and processes for daily business management – making sure those systems work in the real world.
Letting you know when you may need another professional to help you deal with specific situations (think legal or HR advice)
What Is Accounting?
Accounting is the process of collecting financial information and then presenting it in an understandable and helpful format. This enables you to evaluate the information that you have in order to make critical decisions about the business.
Your accountant will be able to tell you the amount of taxable profit (or loss) your business is generating, what your cash flow situation is and what the current worth of your company's assets are. As part of their work, they should be able to dig deeper into the numbers to provide you with a greater knowledge of trends and variations.
Typical accounting tasks include:
Tax advice and planning
Budgeting
Preparing annual financial statements and reports
Analysing business performance
Auditing
Cash flow forecasting
The Differences Between Bookkeeping And Accounting
Accounting and bookkeeping are closely related in several ways, and you may discover that your bookkeeper or accountant is capable of all or parts of both tasks. However, there are some key differences between them, including:
Overall Role
Bookkeeping (especially as performed by a Professional Bookkeeper) is an aspect of Accounting – just like a surgeon and a GP are both doctors ….
Bookkeeping is the process of keeping track of all financial transactions, and some regular reporting on behalf of the business: think monthly management reports, BAS lodgement, Single Touch Payroll and Superannuation lodgements.
A BAS Agent can liaise with the ATO regarding your BAS liabilities, and payroll lodgements.
A Professional Bookkeeper can provide regular reports (Profit & Loss, Balance Sheet, Cashflow Statement), and can help you interpret them.
To a certain extent, a BAS Agent can liaise with banks/financial institutions for you.
And they are often the middleperson between you and the tax agent/ATO/ Banks etc – translating the jargon to terms you’ll understand.
Professional Bookkeepers are keenly interested in the daily functioning of your business – its results, productivity, efficiency – and will work actively with you to improve all the above.
Accounting is the process of analysing the financial situation of a company and communicating that information to the appropriate stakeholders.
Accountants (aka Tax Agents) will be the main interface between you and the ATO regarding your tax affairs. They will be calculating the taxable income of the business, and its tax liabilities. They’ll be advising you on the best trading structure for your business. They’ll also be advising on your exit strategies, retirement – i.e., the ‘big picture’ stuff.
Qualifications
Accountants require at least a bachelor’s degree and must meet the strict requirements of the accounting code of practice. Tax Agents must be registered with the Tax Professionals Board (the TPB) and will have stringent ongoing professional education requirements.
Professional Bookkeepers, require a minimum certificate IV in accounting / Bookkeeping, and MUST also be registered BAS Agents (also with the TPB). In addition, a Professional Bookkeeper should be a member of a professional body (Rachel is a Member in Practice with the Institute of Certified Bookkeepers) and will have similar ongoing professional education requirements to those of tax agents.
Decision Making
When it comes to decision-making, professional bookkeepers can play a significant role by recording and reconciling the financial data and ensuring that ATO lodgements are up to date, and that payments are also either up to date, or on a payment plan. They will be ‘johnny on the spot’ for daily financial decisions.
The Tax Agent (accountant) will take the information provided by the Bookkeeper and use this to provide the above-mentioned big picture information.
Make sure to get in touch with our expert and friendly team at Early Bird Accounts for all your business's bookkeeping needs.
About the Author
Rachel has over a decade of industry experience, an advanced diploma, a passion for taking the stress out of running a business and enabling businesses owners to go on doing what they do best.