Accounting vs. bookkeeping: our small business accountants explain

Say your car engine runs into problems. You wouldn’t take it to a smash repair centre, would you?

Of course not – you’d instead take it to your local mechanic. While these two professions both work on cars, panel beaters and mechanics work in completely different ways.

Accounting and bookkeeping are no different in that regard.

Sure, both professions deal with numbers and overlap in certain areas. However, that’s where the similarities end.

These two professions are apples and oranges. We accountants perform a completely different role to your bookkeeper, and help your business in totally different ways (though the line is slightly blurrier nowadays).

Today, our small business accountants in Melbourne explain the different roles that bookkeepers and accountants play, how we complement each other and the different ways we can help you achieve your business and life goals.

If this is news to you, we suggest reading on!

So, what exactly is the difference between bookkeeping and accounting?

The role of small business accountants

Accounting focuses on interpreting, analysing and reporting financial data for businesses. 

We do much more than just report the numbers – accounting focuses on helping you to plan and make critical business decisions.

Part of that involves sitting down with you and going into the “blood and guts” of your finances, so to speak.

Our small business accountants analyse and give meaning to the numbers, allowing you to make an informed decision about the direction of your business.

Our work doesn’t end there.

We also get hands-on, helping you reach that goal by helping you strategize and create action plans and tax arrangements that help you achieve your business goals.

Full services offered by a small business accountant can include:

• Tax advice and planning
• Business tax returns
• Financial management advice
• Auditing
• Corporate reporting and compliance

Say your long-term goal is to grow your business until you can retire early, or start up a franchising operation.

Your small business accountant will take a stocktake of your entire business (and not just revenue either, but assets, tax liabilities and debt too). We may also collaborate with you in long-term planning, or look at benefits and schemes.

In a nutshell, small business accounting is a big picture profession – one that’s focused on the future, and helping you reach your goals.

What about your bookkeeping?

If accounting is all about the future and what will happen (ie: your long-term goals), then bookkeeping is all about what has happened, and its implications for your business.

Specifically, bookkeeping is focused on everyday financial transactions and expenses that come with running a business.

Your bookkeeper concerns themselves with keeping records of expenses, revenue and cash flow among other things.

In addition to recordkeeping, your bookkeeper can also help with:

• Invoicing
• Payroll
• Debt collection
• Account management
• GST

All of this stuff is immediate, and affects your ability to keep the lights on. If you want to be successful in business and achieve your long-term goals, you can’t afford to lose sight of these day-to-day realities.

By keeping track of these for you, bookkeeping helps you monitor your business’ performance, and correct issues as they arise.

For example, a bookkeeper can help identify spikes in business expenses, and can help you determine which of your products and services are selling the best.

Those aren’t the only differences…

While the overall focus of both these professions is a pretty major difference, it isn’t the only one. Accounting and bookkeeping also differ in a number of other areas…

Different reports

Since we focus on different types of data, bookkeepers and accountants also generate different reports.

For example, bookkeepers can create BAS statements, as well as expense and revenue reports.

By contrast, your small business accountant focuses on balance sheets and profit and loss statements.

While these include data from your bookkeeper’s reports, your accountant’s reports look at much more.

For example, a profit and loss statement needs revenue and expense reports from your bookkeeper, true. However, it also looks at non-monetary expenses, such as depreciation, loss of inventory and so on.

Training

As accounting is much more analytical in nature and deals with much more complex information, it also requires a greater level of training than bookkeeping.

In order to become an accountant nowadays, you’ll need to complete a Bachelor’s degree, and become certified, either as a CA or CPA.

You can’t officially call yourself an accountant unless you have both of these boxes ticked.

By contrast, bookkeepers need a Certificate or Diploma in bookkeeping, and professional certification is optional.

Does your business need both a bookkeeper and an accountant?

If you ask us, the answer is a resounding “yes!”

Many business owners only have one of the two for their business. In fact, many aren’t even aware that there’s a difference between the two at all (which is why we’re writing this article).

Of course, we hope you now understand that each play different roles, and help your business in different ways.

You’ll also no doubt have figured out that both roles complement each other quite nicely!

Our small business accountants are focused on providing advice, helping you make long-term decisions and plans regarding your business.

We can’t do that without accurate data… data which your bookkeeper provides!

All the data compiled by your bookkeeper gets sent to us. Once we have it, we compile it together, creating profit/loss statements and balance sheets that give us an overview of where your business is at.

Without this information, we wouldn’t be able to do our jobs. In a way, bookkeepers and accountants are joined at the hip – you need both to get a full picture of how your business is doing!

We work closely with Melbourne bookkeepers Maximum Business Solutions – this partnership allows both of us to provide our clients with more comprehensive service and advice, from both a bookkeeping and accounting point-of-view.

Need a small business accountant in Melbourne?

Since 1966, Bruce Edmunds & Associates has helped small businesses all over Melbourne be successful.

While the faces and tools have changed considerably over the years, our mission hasn’t: we’re still helping individuals and small businesses achieve their goals with expert accounting services and qualified advice, even after all these years.

Whether it’s help with your business tax deductions, tax returns, forecasting, auditing or advice about the feasibility of your business growth strategy, our team of small business accountants are working for your success.

Give us a call today on (03) 9589 5488, or click here to find out how we can help your small business find success.