If you have recently started a business or are running a small business, you might be handling your finances yourself. Well, not just you, but most entrepreneurs thrive on a ‘Do It Yourself’ mentality. But chances are that as your service and inventory expands, you would require professional help to manage your finances. This could be because you may not want to get lost in your business’s day-to-day books and lose sight of the big picture.
Book-keepers and accountants both help you handle your company’s finances. They cater to a common goal: Your company’s financial well-being. But are they the same? No. There is an important distinction between their roles and skill set.
Let’s have a look:
Who is a bookkeeper?
A bookkeeper’s primary duty is to record your company’s financial data systematically. A bookkeeper must register your business’s day-to-day transactions and classify them into several categories: payroll, invoices, and expenses. Their role is transactional and does not focus on detailed analysis. Recording your business’s daily transactions is the first step in the accounting process, which is often suited for a bookkeeper.
A Bachelor’s degree in Finance is not a prerequisite to becoming a bookkeeper. Certification in an accounting course with a basic understanding of accounting is good enough for a bookkeeper. Most entrepreneurs prefer bookkeepers who have at least 2–3 years of working experience.
Who is an accountant?
The primary role of an accountant involves interpreting, analysing, reporting, and summarizing the financial data (generally collated by bookkeepers) of your company. They usually review the financial data and convert it into informative financial reports. These reports often aid the business owner in making timely and informed decisions.
A Bachelor’s degree in Accounts or Finance is a must to become an accountant. To become more proficient, they might choose to become a Certified Public Accountant (CPA).
When should I hire?
Many entrepreneurs believe that hiring or outsourcing financial support for their businesses can be a considerable expense for their business, especially during the initial stage. On the contrary, hiring financial assistance in your company’s initial steps can help you create a robust commercial business plan that will help save a lot of time and money. You would know where you can reduce your tax liability and capitalize on your income. If you are not keen on hiring someone, you can also consider outsourcing the required function.
Hire a Bookkeeper if you need to manage:
· Overflow of daily transactions
When the day to day transactions of your business are getting out of hand, you should delegate this job to an experienced bookkeeper. If you are lagging in maintaining your records and updating them, it’s time to hire a bookkeeper. This will not only free you up but give you the time to ponder upon more critical business decisions.
- Cash Flow
If you are not able to maintain the daily cash flow in your business, you can get some help with that. Bookkeepers can help with maintaining a steady cash flow in your business. They can keep an eye on the balance of revenues to expenses and offer timely advice in case of any cash shortage.
- Accounts Receivable and Accounts Payable
If you don’t want to get involved in each payment to your suppliers or send out invoices to your clients, bookkeepers can ease that process for you. Bookkeepers keep track of all invoices and can make the payments on your behalf. They can also issue invoices to your clients and maintain the ledger of accounts receivables. Following up with clients for your due payments can also be handled well by a bookkeeper.
- Compliance and Deadline
You may miss a tax deadline due to your busy schedule, resulting in paying a hefty fine. Tax regulations and guidelines are pretty strict and need to be adhered to. A bookkeeper ensures that your records are accurate and up to date. They also make sure that your business stays in line with the relevant laws.
Hire an Accountant to manage:
- Financial Statements
If you have zero idea about financial statements, you must consider hiring an accountant even for a small business. Analysing and interpreting financial statements is not everyone’s cup of tea. You can hire an accountant or an accounting firm to do this for you. They can help by breaking it down for you in simple terms. They can also assist in filing your tax returns. A skilful accountant can help direct your business to the right track from the very beginning.
- Investors and Loans
Acquiring investors and keeping them happy is a challenging task. Nothing makes them more comfortable than seeing a useful and accurate financial report. This job can be performed very well by an accountant. Also, if you plan to gain more funding or loans from a prospective investor, it is advisable to have a detailed business plan ready. Accountants can help you chalk out the financial portion of your business plan.
- An upcoming audit
Audits can be a stressful time for most entrepreneurs. Accountants can help with managing your review and financial statements. A good amount of time and money can be saved by adhering to an accountant’s advice. Accountants serve as a valued advisor in your business.
- Expanding Business
If you are keen to expand or diversify your business, you need to focus on your business’s critical aspects. If innovation, team building, streamlining, and a better turnover are your main goals, it is recommended that you hire an accountant to help you with your financial capabilities. A knowledgeable accountant can offer good strategic advice, as well.
Both the above roles are interdependent but can function well individually. Whether you own a small, medium, or a large business, correct financial advice can lead to great opportunities in the long run. It is also important to note that financial reports and analysis depend on the accuracy of your company’s financial data. Some smart bookkeepers can offer sound advice when it comes to business decisions, whereas some accountants are open to daily record keeping. Their roles are very different, but in practicality, they do overlap in some scenarios. Both these functions cannot be undermined as they are interlinked but add their value to a business.
