Do you need an Accountant or a Bookkeeper for your Small Business?

Sep 8

Diving into business can be been a wild ride, especially when it comes to all the financial bits and bobs. I mean, who knew there were so many questions?

Accountant or bookkeeper?
What even is the difference between them anyway?
What can I claim as a business expense?
And what the HECK is a reconciled bank statement?
Xero or Quickbooks? Or neither??

If you're feeling a tad overwhelmed by the same questions, trust me, I've been there.

Ten years ago when I first started it was really bloody hard to find information that catered to Australian based businesses (like me), so grab a cuppa, and let's chat about the lessons I've learned, the mistakes I've made (so you don't have to), and the tools that have been absolute game-changers for me.

Research shows that most businesses fail within the first three years, and a lot of that is because people don’t stay on top of their finances. It’s one of the most confronting and overwhelming aspects of being a business owner, and where a lot of people fall down.

I’m really passionate about educating small creative business owners (especially my fellow Aussies) about all these aspects of small business life, so let’s dive in.

This information is just based on my personal experience, and you should always discuss with your own advisors before relying on any information contained in this guide. This post has been written from the perspective of operating as a sole trader with an uncomplicated financial situation.

DID YOU KNOW?
According to the Australian Bureau of Statistics, more than 60% of businesses will stop operating within the first three years of business.

Do you need an Accountant or a Bookkeeper (or both)?

Starting a business is really overwhelming, especially as a creative. I was so determined to prove that I could do it, that I waited way too long before getting professional help 😅.

It wasn’t until about two years after I’d launched my business that I decided it was time to outsource my tax return to an accountant, and dang, I was in for a rude awakening (more on that below).

The general advice I give to new small business owners now, is to invest in a one-off session with a book-keeper/accountant as early as possible to ask for advice that is specific to your financial situation, and to get clear advice on questions like:

What’s a business expense and what’s not?
What can you claim as a deduction?
What documents will you need to provide to your accountant at tax time?
When should you/will you need to register for GST?

What’s the difference between them?

Part of the reason I didn’t get help was because I didn’t know where to get help from.

It’s pretty common for people to get these things confused, but there are a few main differences:

An accountant is someone who typically prepares tax returns, financial statements, budgets and analyses business performance (from a financial perspective).
Alternatively, a bookkeeper is someone who helps you manage the day to day finances, such as payroll, invoicing, receipts, and recording general business transactions.

An accountant can help you:
add_circle Figure out what business structure will be most suitable for you and your financial situation (i.e. a sole trader, a partnership, a company, or a trust);
add_circle Understand your financial and legal obligations when it comes to record keeping for the government;
add_circle Analyse your financial goals + plans, and in some cases help you figure out pricing;
add_circle Lodge your tax returns on your behalf;
add_circle Creating a business budget, profit + loss forecasting etc;
add_circle Setup accounting software.

A BOOKKEEPERcan help you:
add_circle Manage the day to day business transactions in your accounting software such as creating + sending invoices, reconcile your bank statements, track your receipts and expenses etc;
add_circle Keep you accountable to your business budget;
add_circle Stay on top of your invoices + make sure clients are paying on time + help you manage your cashflow;
add_circle Manage your payroll if you plan to or already have employees;
add_circle Prepare financial reports and help you understand them.

You can get advice from either, but connecting with both an accountant and a bookkeepers (or someone who provides both services) will be the most helpful.

I do my own bookkeeping on a day to day basis because I like to be across my financials, but I’m able to book a call in with my bookkeeper if I ever get stuck or need help figuring something out. The only time I (generally) see my accountant is at tax time, or when I want some financial advice for situations that will impact my income & tax.

RECOMMENDATION:

If you are looking for an awesome bookkeeper/accountant, I wholeheartedly recommend the team at Healthy Business Financials. I’ve worked with Stacey many times over the years, and her help and advice in getting my accounting software up and running, and helping me when I get stuck or have made a mistake has been a total blessing.

What is considered a business expense?

This was probably the biggest question I had at the beginning. This is based on my own personal knowledge - but essentially, you can claim any costs incurred in the ordinary course of business, and it mustn’t be for private use. If it’s for a mix of business and private use, only claim the portion that is related to your business.

Here’s a general list of the expenses that I claim through my business:

stationary and printing;
subscription fees that I use to run my business (Xero, Adobe, Studio Ninja, etc);
accounting + legal fees;
computer equipment
software fees;
bank fees & transaction fees from services like Stripe, Paypal etc;
marketing and advertising expenses;
education;
insurance.

What about household expenses?

you can claim rent and utilities (only a portion though, I use 3/8 rooms in the house for business purposes, so I claimed 3/8 of these expenses).
you can’t claim any part of your home mortgage as a business expense without some tax implications.

Under my photography business, I also claimed:

camera gear (bodies + lenses, flashes etc)
photography equipment (memory cards, card readers, batteries, chargers,
camera maintenance fees;
furnishings and gear for my newborn studio (bean bag, blankets etc).

Under this business, I also get to claim other specific things like:

website & domain fees;
plugins & software related to web design.

Get Australian based bookkeeping software

Like many, I started my business with a trusty old Excel spreadsheet to keep track of everything which worked for about a year or so, then I switched to a CRM software called LightBlue.

But when I finally connected with an Accountant to do my tax return, they told me I needed to provide something called “reconciled bank statements” - I’d never even heard of them. Essentially, it's an annual task where you match bank statements with invoices, payments, and expenses. Every dollar in should correspond to an invoice, and every expense should be categorized. This ensures your financial records are accurate and transparent.

To lodge my tax return, I had to provide reconciled bank statements to my accountant. This meant migrating to a new bookkeeping system, inputting a year's worth of data, and manually reconciling everything. It was a marathon!

Upon my bookkeeper's advice, I switched to Xero, the darling of the Australian accounting industry. I still love Xero and would recommend it, but during COVID my income took a serious hit so I switched to Quickbooks as it’s a little cheaper (much to my accountant’s dismay 😅).

When I first joined up with Xero originally, I booked a two hour training session with Healthy Business Financials who sat down with me and taught me everything I needed to know, from creating and setting up invoices, recording my expenses and reconciling my bank transactions.

After that two hour session I walked away feeling so confident and empowered, it was easy once I knew what I was doing.

Learn from my mistakes!
cancel If you’re Australian, don’t sign up to an American based company (such as Honeybooks, Dubsado, 17 Hats, etc) and think you’re done. In Australia, if you want to outsource your tax returns to an accountant, you will need to provide them reconciliation statements (or pay $$$$$$$ for them to do it for you) in order for them to lodge your tax return. I tried to combine everything into one, and paid dearly for it when I had to spend almost two weeks importing and reconciling 2 years worth of transactions in Xero 😅.
check_circle My customer management system (CMS) of choice is Studio Ninja. I use this platform to create client portals for my client, with contracts, invoices and questionnaires. Studio Ninja has an integration with both Xero and Quickbooks, so any invoices you create in Studio Ninja will be automatically copied across, which makes reconciliation easy!

Both these programs make tracking and managing my income and expenses a gazillion times easier than any other program I’ve ever used, especially now that I am registered for GST and have to prepare and lodge BAS statements.

The benefit of using software like Xero or Quickbooks is that it automatically imports my bank account transactions, allows me to automatically set up rules & categories to make reconciling them easier, and helps me match income to client invoices, so I know at a glance who has paid and who has not.

There's a few budget-friendly options out there for the savvy saver (Wave is a popular free one). But remember, sometimes you get what you pay for. So, weigh up the pros and cons and see what fits your biz best.

Plus it makes tax time soooooo easy - I just need to print a few reports off and hand them to my accountant and voila!

Do you still need a CRM if you use bookkeeping software?

In my world, it's a big fat YES! 🙌

A CRM (client relationship manager) keeps all my client deets in check, while bookkeeping software makes sure I'm not pulling my hair out during tax time. Think of them as the dynamic duo of your business toolkit.

I personally use Studio Ninja, which is another Australian based software created by photographers, for photographers (but I know there are plenty of other creatives out there like celebrants, florists, etc) who use it. I also use it to manage my clients and jobs for this business as well.

If you’re interested in using Studio Ninja you can use my promo code (LE69440Y) to get 20% off your subscription (and I get 20% off my subscription too 😍).

This is great, but I want to learn how to manage my cashflow better.

After mastering the ins and outs of bookkeeping, the next crucial step in ensuring your business thrives is learning how to manage your cash flow effectively.

While bookkeeping gives you a snapshot of your financial health, but it’s what happens after the money has come into (or gone out of) your account.

Learning how to manage your cash flow ensures your business remains solvent (meaning it always has enough money to pay your expenses).

You can read my post 'How to Manage Your Cash Flow' where I share my my go to method for managing my cash flow in my small business(es).

It's the perfect complement to your newfound bookkeeping knowledge 😉.

Over and Out!

Alright lovely humans, that's a wrap on my financial wisdom (or, you know, the lessons from my many "whoops" moments 😅).

If you're diving into the world of solopreneur-ship or any creative venture, remember: it's okay to ask for help. Heck, it's more than okay—it's smart!

Drop me a comment if you found this helpful (it encourages me to keep writing).

Toodles!

Elle

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Before relying on the information on this website, seek independent advice from a qualified lawyer or accountant. The information contained in this website is general information only and is provided purely for your convenience. The information has been provided without taking into consideration the personal circumstances of any user, and the information is not to substitute professional advice. Any reliance you place on such information is therefore strictly at your own risk.