As a business owner you’ll be concentrating on product or service delivery. When major events occur, it is easy for your attention to be fully absorbed. Then year-end arrives and you can find yourself in a pickle – without the clear financial information you need to complete your self-assessment tax-return.
What you need to prevent this situation are two vital business processes: accounting, and bookkeeping. These are important financial processes that’ll assist you with financial control and end-of-year tax affairs. But they’re not the same thing, and it’s important you understand the difference to maximise their contribution to your business.
Bookkeeping is the process of keeping accurate records of business transactions. All financial transactions are recorded and stored in your ‘books’. Additional activities include verifying and recording invoices, paying suppliers and keeping receipts.
WHAT DOES A BOOKKEEPER DO?
A bookkeeper is a data entry professional. A bookkeeper’s role is to maintain accurate business records. The ‘books’ a bookkeeper maintains are then used by an accountant to prepare finance reports and file tax returns. Some accounting practices offer bookkeeping as part of their service, so everything’s under one roof.
HOW MUCH SHOULD YOU DO YOURSELF?
You can practice good bookkeeping yourself with software. If you’re already on top of your books but are struggling to keep tabs on your invoices, supplier invoices and bank reconciliations then it is time to ask for help.
If you don’t want a hand in maintaining your books, outsourcing to a bookkeeper is the only way. Bookkeepers typically charge anywhere from $60 per hour. We offer value based fixed fee packages to assist in your cash flow and ensure your lodgements are compliant.
Accounting is the process of presenting financial information in various reports. A relevant example is the end of year self-assessment. Simply put, accounting is the art of presenting information in different forms, such as balance sheets and income statements.
WHAT DOES AN ACCOUNTANT DO?
An accountant is a finance expert who manages your tax affairs on your behalf. Your accountant exists to provide up to date monetary business advice and help you run a tax efficient operation.
SHOULD YOU USE THE SERVICES OF AN ACCOUNTANT?
You don’t need an accountant to file your self-assessment tax return. You can do this yourself online in a matter of minutes. However, in doing so you run the risk of paying more income tax than you should. For example, you might not make proper use of your allowable expenses or set up a tax efficient payment structure.
Accountants are worth their weight in gold because they can advise you on the most tax efficient structure for your business. This is all complicated stuff if you’re not familiar with accounting – which is why you need an accountant.
COMBINING BOOKKEEPING AND ACCOUNTING
Whether you choose to take on a bookkeeper or do the work yourself, it’s important you bring bookkeeping and accounting together. Both jobs are separate but the relationship between them needs to be very close. Good bookkeeping makes an accountant’s life easier and good accounting ensures all your hard work is put to proper use when any financial reports or returns are created.
In additional good bookkeeping help reduce your bill for accounting services as there will be fewer queries to address.