What is bookkeeping?
Bookkeeping is a standard business practice involving the systematic recording of financial transactions, including income and expenses, to maintain accurate financial records. It is an essential function for most businesses that helps inform decision making, meet tax obligations, secure financing, and track a business’s financial health.
Bookkeeping encompasses various tasks such as maintaining ledgers, tracking income and expenses, reconciling accounts, and ensuring that all financial records comply with relevant tax and regulatory requirements.
What does a bookkeeper do?
A bookkeeper is the financial guardian of a business, meticulously recording, organising, and managing its financial transactions. They ensure that all financial records are accurate and up-to-date, offering insights into a company’s financial health and helping it make informed decisions. In short, a bookkeeper is the backbone of financial stability, providing businesses with the clarity and compliance they need to thrive.
Their typical responsibilities include:
Record Keeping
Bank Reconciliation
Bookkeepers reconcile bank statements with the company’s financial records to identify any discrepancies, ensuring that the company’s cash flow is accurate
Accounts Receivable & Payable
They manage accounts receivable by tracking customer payments and accounts payable by overseeing vendor bills and payments.
Payroll Process
Many bookkeepers handle payroll, including calculating employee wages, preparing pay runs, and ensuring compliance with tax laws
Financial Reporting
They generate financial reports, such as income statements, balance sheets, and cash flow statements, to help business owners make informed decisions.
Tax Compliance
Bookkeepers ensure that all financial records are in order, helping businesses meet their tax obligations and avoid penalties.
What is the difference between a bookkeeper and an accountant?
While bookkeepers and accountants share similar financial responsibilities, the main differences between accountants and bookkeepers involve the scope of financial services they offer and their qualifications.
Bookkeepers typically hold a Certificate IV in Bookkeeping or a similar qualification, while accountants require a bachelor’s degree and professional certification, such as being a Certified Practising Accountant (CPA) or a Chartered Accountant (CA).
Bookkeepers focus on day-to-day financial tasks, including data entry, reconciliation, and reporting. Accountants provide broader financial services, including tax planning, financial analysis, and audit support.
In Australia, bookkeepers are not authorised to provide tax or financial advice, while accountants are subject to stricter regulatory oversight and can offer a wider range of financial services.
Accountants typically review and analyse the financial data provided by bookkeepers to offer strategic financial advice and make high-level financial decisions.