When early phase businesses go looking for some accounting support, they often go looking for a Bookkeeper. Why is this the first choice over going looking for an Accountant?
My thoughts are that this is down to two things: cost, and a misunderstanding of the roles.
First, let’s deal with cost. Some business owners believe that hiring a bookkeeper is cheaper and it fits within their budget. Often Bookkeepers are associated with low cost, and Accountants are associated with big, fat, unexpected bills.
It may be true that Bookkeepers typically charge less by the hour, but let’s look at the other costs that might not be so obvious:
The cost of getting returns filed incorrectly. This is something I have seen first hand many times. Someone has used a bookkeeper who has been offering services beyond their experience (note there is a difference between thinking you can do a job, and being able to do a job correctly). When the IRD come knocking and there are errors made, this can be costly. I have personally seen a mistake over a few years which cost the business owner and extra $120k they could have avoided.
The cost of not getting proper advice. Bookkeepers are not Chartered Accountants and do not have the same technical tax and accounting training. They may make unintentional mistakes and may provide the wrong advice. Once again, may be cheaper in the short term, but may end in huge amounts of pain down the track.
The cost of getting an Accountant to fix the Bookkeepers errors. Bookkeepers are not all created equal. There is no certification required to call yourself a bookkeeper, and a lot of the certifications are so easy to gain that it can be misleading what it means they are skilled in. If errors are made, paying an Accountant an hourly rate to fix these will end up costing you a lot more long term.
Second, let’s deal with the misunderstanding of what a Bookkeeper is. The difference between a Bookkeeper and Accountant is that a Bookkeeper typically reconciles bank accounts, pays bills, sends out invoices, and files GST returns. Accountants prepare full financial reports which include making sense of your Balance Sheet, provide tax advice and planning, and have knowledge of the full picture of your business and not just small snippets.
Unfortunately the term Bookkeeper has been tarnished in my eyes because I have seen some people who do a few Xero trainings and think because they can use it, they can now call themselves a Bookkeeper. Once again, there is a difference between someone who thinks they can use Xero, and someone who can use Xero correctly.
Don’t create a headache for yourself and your business down the line by skimping on services at the start of your business journey. The start of the business journey is the right time to get your processes in place early because from my experience, the habits business owners pick up at the start are often the ones that follow them for years.
At Your Finance Team (YFT), we pride ourselves on offering skilled bookkeepers, as well as Chartered Accountants. We have our skilled bookkeepers keep accurate and tidy records for our clients, and then our Accountants prepare month end reports, year end financials and tax returns, and provide tax advice and general advice along the way.
By using a combination of the two skillsets, we are able to offer a better cost model compared to using an Accountant solely, and also offer much higher quality of work compared to using just a Bookkeeper.
Please get in touch with us if you would like to discuss your organisations needs or discuss pricing options for your scenario.
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