Bookkeeping vs. accounting: what's the difference?

Many people use the terms bookkeeping and accounting interchangeably. But are they actually the same? In fact, there are some nuanced yet important differences between these two finance-related fields.

If you’re looking to hire some help with your finances, you should weigh the benefits of bookkeeping vs. accounting. You may only need a part-time bookkeeper to assist a full-time accountant. Read on to learn more about bookkeeping for professional services and beyond, and how it differs from in-depth accounting needs.

Key differences between bookkeeping and accounting

Bookkeepers and accountants are both important. You may grow your finance function with a bookkeeper and then add accounting support. Or, you may use both types of services in tandem. Here is what each role involves.

Bookkeeping tasks: what do bookkeepers do?

Bookkeeping is concerned largely with recording. This means recording transactions, invoices, outstanding debts, interest costs and more. Bookkeeping is essential because it helps you organise daily financial transactions and benefits your long-term analysis. Some common bookkeeping tasks include:

• Tracking all incoming payments
• Tracking all outgoing payments
• Reconciling bank accounts
• Running payroll
• Sending invoices to customers
• Preparing the business activity statement (BAS), where the bookkeeper is a registered BAS or tax agent, or works under one

Accounting tasks: what do accountants do?

Accountants often take the work that bookkeepers have done and use it to create further analysis and insights. In addition to handling annual tax, accountants may generate complex reports that the business owner or Chief Financial Officer can use to set company objectives and make major decisions. Where bookkeepers concern themselves with recording, accountants are focused on analysis. Accountants may complete tasks that include:

• Analysing the costs of operation
• Preparing and lodging annual tax returns (as a registered tax agent)
• Preparing year-end financial statements
• Advising owners and executives about financial matters
• Summarising overall financial health

Audits are a specialist service in their own right. Where the law requires an audit, it must be carried out by a suitably qualified auditor (for many companies, a registered company auditor).

What credentials do bookkeepers have?

In Australia, bookkeepers may be members of a professional body such as the Institute of Certified Bookkeepers (ICB). Membership shows a professional has met that body’s standards. However, many people have bookkeeping experience without an official certificate or degree.

The title matters less than the registration. Anyone who provides BAS services for a fee, such as preparing or lodging a BAS, or advising on GST, PAYG withholding, payroll reporting through Single Touch Payroll or super guarantee obligations, must be registered with the Tax Practitioners Board (TPB) as a BAS agent or tax agent, or work under one. You can check a provider on the TPB public register.

What credentials do accountants have?

To become a Certified Practising Accountant (CPA) in Australia, professionals must hold a degree recognised by CPA Australia, pass the CPA Program and complete 36 months of relevant practical experience. CPAs must then complete continuing professional development each year and comply with a code of conduct.

Accountants may also become a Chartered Accountant (CA). Chartered Accountants belong to Chartered Accountants Australia & New Zealand (CA ANZ). They must complete an accredited qualification and the CA Program, alongside a period of mentored practical experience.

As with bookkeepers, the right to do certain work comes from registration rather than the job title. Preparing and lodging tax returns or giving tax advice for a fee requires registration with the TPB as a tax agent.

Do you need an accountant or a bookkeeper?

You know you don’t want your bank account to enter the red. And you definitely don’t want the ATO to apply penalties. But when it comes to day-to-day tasks, do you need an accountant or a bookkeeper?

Below are signs that your immediate needs require an accountant, and signs that a bookkeeper may be what your business needs.

Signs you need an accountant

If you have your basic bookkeeping covered but you don’t know what to do with it, a qualified accountant can step in and do wonders with your data. If any of the following conditions sound familiar, your business may need an accountant to help out.

• You have lots of figures, but you’re not analysing them. If you don’t really know what to make of your auto-generated financial reports, an accountant can help. Accountants interpret your monthly reports and give recommendations based on what they learn.
• You don’t know how to lodge your tax return. A registered tax agent can make sure your returns are lodged correctly and on time. This may help you avoid penalties, and properly prepared returns help you claim the deductions and offsets you’re entitled to.
• Your reports are very basic. Maybe you have a lot of accounts receivable and accounts payable reports, but nothing more complex. An accountant will give you big picture insights. You can learn more about your overall financial wellness when someone interprets your reports to look for trends and opportunities.

Signs you need a bookkeeper

Maybe you need to get back to basics. Are you a new business owner or did you get behind in your bookkeeping over the last year? Catch-up bookkeeping can make a big difference. If these scenarios ring true, it may be time to phone a bookkeeper.

• You can’t keep up with your general ledger. Your ledger tracks each transaction. A bookkeeper can step in and make sure that cash flow is being tracked and organised.
• You are overwhelmed by payroll. As your team grows, so do award rates, leave, super and Single Touch Payroll reporting. A bookkeeper helps take this off your hands so you can focus on other vital decisions.
• You don’t know how much money people owe you. Unpaid invoices are a major problem for many companies. A bookkeeper can catch your business up on accounts receivable and make sure you’re not leaving money on the table.

Should you outsource your bookkeeping and accounting?

A virtual bookkeeping service can transform the way you run your business. If you don’t have the budget to hire a full-time bookkeeper, an outsourced service may be the right solution. With online bookkeeping, you get a team that learns your business over time and can take on more as your organisation grows.

Visory runs bookkeeping, payroll, accounts payable and accounts receivable for growing businesses, with a dedicated team and its AI, Delphi, overseen by that team. Visory Insights and a Business Performance Partner then turn the numbers into decisions.

The final word

Understanding bookkeeping vs. accounting is the first step. Next, you need to find a trusted partner. It’s wise to form a long-term relationship with your bookkeeper or accountant so they can learn your organisation from the inside out. Then, grow your support as you expand your operation. Learn how Visory runs bookkeeping as part of your finance function, or see how Visory works in practice.