Which accountant is right?
For a small business owner?

Which accountant is right?

For a small business owner?

When you take the plunge to invest in an accountant to help you with your small business, it’s important to understand the type of help you need and who to engage.

The following information is general in nature and has been created to help you understand when you might want to consider the services of a bookkeeper, and some of the different types of accountants and their skills as a small business owner.

The Bookkeeper

The often overlooked and undervalued bookkeeper can be your best friend in business. It’s a misconception that your accountant will take your pile of receipts and turn them into a beautiful set of financial records for your business. Generally, you will need a bookkeeper to perform this role.

Business owners do take on the task of keeping their books in order, at least in the early days of business. It’s recommended to get advice on your bookkeeping before you get too far into the first year of business to save yourself a headache and dollars.

Bookkeeping services are focused on organising your business transactions whenever you make or spend money. The bookkeeper will use accounting software to track and allocate categories to each of the business transactions and potentially any personal transactions which have slipped in e.g. when you pay for groceries on the business credit card.

A key task bookkeepers perform is reconciling each of your bank transactions to your records of the transactions in the accounting software (or perhaps you’re using a spreadsheet or paper records).

Bookkeepers' key role for a small business owner is helping you have accounting information ready for your tax responsibilities (like your tax return, GST, payroll and super). And helping you see how your business is performing at any point in time e.g. what cash is leftover after the bills are paid.

Person with long blonde hair and glasses speaking on a phone, while sitting on a couch with a laptop working.

Bookkeepers can assist with payroll, handling overdue accounts and helping to streamline and organise business processes. It depends on the individual's qualifications and experience as to what they can offer you.

Most bookkeepers don’t provide business or tax advice, they are focused on helping you organise the transactions into accounting information.

Checking Qualifications

There are laws that protect consumers and restrict who can perform particular bookkeeping and accounting services.  In Australia, the Tax Practitioners Board (TPB) regulates tax practitioners. A practitioner registered with the TPB has the required qualifications and experience to legally help you with:

  • Tax preparation tasks e.g. determining the correct classification of transactions in your accounting records/software
  • Tax returns
  • Business Activity Statements (BAS)  
  • Payroll/super responsibilities e.g. Single Touch Payroll (STP)
  • Helping on your behalf with the Australian Taxation Office (ATO)
  • Giving you specific tax-related advice e.g. fringe benefits tax, Pay As You Go Withholding and termination payments.

You can check online with the TPB website via their search function for the registration details of a tax practitioner.

A close up shot of a pile of letters, papers and receipts on a table.

So you need to be clear from the start, who will be lodging your tax paperwork? Do you just want help getting the information organised and then you will self-prepare and lodge? Or do you want a bookkeeper to help with this task? Do you think you will need an accountant to provide advice on your tax affairs?

Depending on your budget you might want an accountant to prepare and lodge your tax papers. But remember if you do decide to use an accountant, you may still need the bookkeeper if you don’t come prepared with your records in order. Accountants don’t generally perform bookkeeping functions in-house, and if they do it can be more expensive.

When you need help using or understanding the transactions, e.g. you start asking questions like; how profitable is my business? Is this expense deductible? These questions are often answered with help from your accountant.

The Accountant

You may not realise that there are many different types of accountants. Their services and fees also differ. As a small business owner, your main experience with an accountant might have only been at tax time, let's consider the most common accountants you may need as a small business.

Tax Accounting

Tax accountants specialise in areas of tax legislation at the local and federal level, generally within the country they provide their services. They may work with only certain sizes of clients e.g. small businesses or large multinationals. They will have experience with certain industries e.g. Retail, Manufacturing, Construction, Exporting, and Online commerce. Some accountants complete work outside of tax and we will cover this below with Financial and Management Accountants.

A tax accountant may only provide you with advice and have a team to perform the “manual” tasks of preparing a tax return or BAS lodgment. So it’s important to ask questions upfront to find the right accountant for your business needs.

Be sure to establish their fee structure e.g. is it a fixed fee? Hourly fees? And will you be charged for ad-hoc questions? Will you need to pay extra for accounting software?

Also, check how they deliver their services. Are they online only? Or do they have an office you can visit? Which accounting software do they use? Consider what’s important and will work for your business.

Beyond Tax

After a tax accountant, the next most likely accountants you may have heard of are Financial and Management accountants. Financial and Management accountants are commonly employed inside larger businesses but the types of work they complete can also be considered as stand-alone skills or types of work completed by other accountants.

This is important to understand because the accountant you may see at tax time who may spend a big portion of their time helping clients with tax obligations may also be able to offer services that would be considered Financial or Management accounting. These services can be beneficial to small businesses.

Financial Accounting

Financial accounting functions are most common in larger companies because it centres on ensuring a business has the required information for shareholders and other external parties like banks and suppliers. Once a company lists shares publicly, there are additional reporting and accounting rules it needs to meet.

For example, they need to have financial statements prepared. Financial statements are business transactions organised in a set way to communicate financial information and prepared in line with the applicable countries' rules. This information isn’t just used by people interested in buying shares but they are one of the major parties who need this information. As you can see financial accounting and the information it produces are primarily external focused.

As an aside, you make have seen Financial Statements automatically generated by your accounting software showing the balance of groups of transactions and totalled under categories like assets and liabilities. So you probably know already that it’s not just big companies that get value from financial statements and financial accountants.

Management Accounting

Management Accounting on the other hand is internally focused. This type of accounting is focused on helping internal stakeholders, such as the manager, understand the business and plan for the future. Management accounting may use information prepared by tax and financial accounting functions but it isn’t bound by external rules. Management accounting adjusts this information to meet its internal aims of understanding and controlling the business.

For example, tax and financial accounting rules dictate how the money you spend in your business is recorded. Depending on the transaction it could be recognised as an asset or an expense (perhaps both or neither!)

Books laid out open creating a pattern of books filling the entire screen.

Getting value from accounting

Naturally, this can be confusing and not overly helpful to the daily success of a small business. Management accounting is about taking the same transaction, the money you spend in this example, and understanding what impact does that have on your business and decision-making? Was it a good investment? What is the impact on your profitability?

Together information from financial, management (and even tax accounting) can help answer small business questions like…

  • Where is cash being made and spent?
  • Where could I cut expenses?
  • Which product is most profitable?
  • How much profit can we expect to make by next year?
  • Can I afford to hire a staff member to help me?
  • Is this a good time to expand the business to a second location?
  • Should I buy a new car for the business now or wait until the next tax year?
  • Do I need to diversify the types of services or products I sell?

Phew… that’s a lot of information that different areas of accounting can generate to help answer some tricky questions beyond the tax return.

This article is subject to copyright, do not reproduce this work as a whole or in part without the express written permission of the author Sophia Martine Consulting.

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Hi, I’m Sophia and I work as a business mentor and accountant. I love making business topics easy to understand and implement in your business.