tax agent

What’s the Difference Between Bookkeepers, Accountants, and Tax Agents?

The world of finance contains many roles. From auditors to analysts, bankers, and financial officers, you can take many different pathways within the industry, depending on your area of expertise and interest. Whether you want to explore a finance role or a small business that may need some financial help, it’s essential to understand a few of the critical positions within the financial sector. 

Undoubtedly, the most common roles you’ll encounter are bookkeepers, accountants, and tax agents. Sometimes these terms are used interchangeably; however, they are not the same. 

To give you a more robust understanding of the similarities and differences between these professional services, Shoebox provides a summary of each role. This guide shows you what working as a bookkeeper, accountant, or tax agent may look like and some of the qualifications you’ll need if you want to break into the industry. So, keep on reading to learn more about these vital services and professional roles.

Accountants

Accountants are typically employed by businesses to assist with preparing financial statements that reflect the business’ performance. They are usually responsible for collecting, recording, analysing, and visualising a business’s financial operations. Further, depending on the scale of the company, the accountant may have additional or fewer responsibilities.

For example, smaller companies may require data collection and report generation – for this; companies typically outsource an accountant for help; however, larger companies may hire one in-house to work as a financial adviser or interpreter. For larger companies, accountants may also provide presentations to external stakeholders. To put it in layman’s terms, an accountant is simply someone who interprets financial information to assist with the more practical business decision-making processes.

According to Seek, some of the specific tasks and duties performed by accountants include the following.

  • We are examining the income and expenditure of the individual or organisation.
  • Creating and maintaining budgets
  • Preparing financial statements
  • Creating accounting policies in consultation with senior stakeholders and alignment with regulatory requirements
  • We are preparing reports that articulate business compliance with regulatory requirements.
  • Undertaking audits, conducting financial investigations and managing insolvency
  • Providing advice about business plans, structures and accounting systems
  • Establishing bank accounts, funds and trusts
  • Managing cash flow
  • Managing investment projects.

To learn more about the role, the Australian Government’s Job Outlook service also proved an excellent resource for stats relating to the profession. Working as an accountant, you can expect to earn around $70K+, the average yearly salary for an accounting position in Australia. To become a certified practising accountant, you must have completed a bachelor degree. Either a bachelor of accounting or a bachelor of business majoring in accounting. After this, to become an accountant, you must become a member of one of the three professional bodies that regulate accounting in Australia. These are Chartered Accountants of Australia (ICAA), the Institute of Public Accountants (IPA) and CPA Australia (CPA).

Although you need these qualifications to become an accountant, you do not need them to work in an accounting role. As long as you’re accredited by one of the bodies above, you will be able to use some basic accounting skills like producing financial reports to be analysed externally. Further, suppose a bachelor’s degree isn’t on the cards for you. In that case, you can progress your accounting skills through courses such as certificate IV in Accounting or diploma of Accounting – these can help you gain entry into the IPA.

Taking Your Degree Further

Already an accountant and looking to progress your career? Getting a CA or CPA can give you a competitive edge. So, what are these extra qualifications, and what can you do with them?

  • CA: This stands for chartered accountants. Obtaining this qualification makes you better equipped to handle more complex accounting processes, like auditing and technical tax issues, and progress towards working with a Big Four firm.
  • CPA: A Certified Practicing Accountant, on the other hand, gains a more varied skill set. This qualification provides additional accounting skills, such as costing, production, marketing and planning, which can help you break into a range of alternative industries.

Critical Skills as an Accountant

 

  • Critical thinking
  • Mathematics
  • Reading and comprehension
  • Communication
  • Computer knowledge
  • Interpersonal skills

Bookkeepers

accounting-tips

Bookkeepers are responsible for maintaining a business’ accounting records. They assist small businesses with recording financial transactions in account books or computerised accounting software. Bookkeepers can be hired to work within a company internally or can be outsourced. As they deal with the fine details of a business’ ingoing and outgoing transactions, they become pretty familiar with their business clients.

According to Job Outlook, some of the critical roles and responsibilities of a bookkeeper include the following.

  • Keeping financial records and maintaining and balancing accounts using manual and computerised systems
  • Monitoring cash flow and lines of credit
  • Preparing and producing financial statements, budget and expenditure reports and analyses using account books, ledgers and accounting software packages
  • Preparing invoices, purchase orders and bank deposits
  • Reconciling accounts against monthly bank statements
  • Verifying recorded transactions and reporting irregularities to management
  • May be required to prepare forms are reporting business tax entitlements and obligations such as the number of goods and services tax paid and collected.

On average, bookkeepers in Australia earn $60K+ a year. Bookkeeping is a role that requires a slightly less extensive qualification process than accounting. To become a bookkeeper, you must hold a certificate IV in Bookkeeping or Accounting. To perform tax preparation processes, you must be registered as a BAS agent with the Tax Practitioners Board (TPB).

Critical Skills as a Bookkeeper

  • Attention to detail
  • Critical thinking
  • Mathematics
  • Reading and comprehension
  • Communication
  • Computer knowledge
  • Interpersonal and relationship-building skills
  • Organisational skills

Tax Agents

Finally, we have tax agents. Tax agents are a specialist type of accountant – namely; they specialise in taxation accounting. To do this, they have studied tax and law to be registered by the TPB. Having this registration means that they can provide tax services to the public – as long as they renew their licence every three years.

As outlined by TPB, some of the roles and responsibilities of a registered tax agent apply to the following.

  • Ascertaining (that is, working out) or advising about liabilities, obligations or entitlements of entities (that is, your clients) under a taxation law
  • Representing entities in their dealings with the Commissioner of Taxation (Commissioner) abouttoIt a taxation law
  • Where it is reasonable to expect the entity will rely on the service to satisfy liabilities or obligations, claiming entitlements under a taxation law.

In Australia, the average Taxation accountant earns $70K+ a year in salary. As taxation is a more specialised accounting role, it requires more qualifications, knowledge, and skill.

For example, it requires constant knowledge of updated taxation legislation – hence the requirement for licence renewal. The skills needed to be a tax agent are more or less similar to those of accountants and bookkeepers.

In Summary

Accounting is mainly concerned with interpreting and summarising these business findings into relevant information. Accountants can construct financial statements for directors or owners to make appropriate business decisions. The skillset required to perform this role is of a high level. Accountants typically use bookkeeping data to conduct their analysis of the data.

Bookkeeping mainly requires recording, identifying, and measuring business transactions. Decisions cannot always be made based on Bookkeeping outcomes – accountants may be needed to step in to assist with financial planning.

Taxation agents specifically provide tax services. This is a specialist accounting area and requires an even more specific skill set as an accounting branch. Tax agents must have an up-to-date understanding of tax and legislation as it changes to support businesses.

If you’ve got a flair for mathematics and good attention to detail and are curious about entering one of the professions above, then go for it! Working within the financial sector is challenging, rewarding, and provides opportunities for you to grow – especially if you’re keen to upskill along your career path. It’s also an excellent stable position, which is an increasingly rare quality in jobs.

For small businesses requiring any of the services mentioned, Shoebox Books provides all three professional services under the same umbrella. Shoebox Books employs experienced bookkeepers, accountants, and tax agents from all around Australia to provide your business with the specific financial services it needs.

Do I need an accountant or a bookkeeper?

The terms ‘accountant’ and ‘bookkeeper’ are often used interchangeably. While they do perform similar roles, there are essential differences between accountants and bookkeepers. If you’re a small business owner and trying to figure out what type of assistance you need when it comes to keeping financial records, these tips might help you choose the correct option.

What do accountants and bookkeepers do?

Bookkeepers can take care of payroll, data entry, petty cash, reconciling bank accounts, and accounts payable and accounts receivable.

If your bookkeeper is a paid employee, they can also prepare and lodge your business’ business activity statements (GST statements or BAS) to the Australian Tax Office.

However, if you are outsourcing these tasks to your bookkeeper, they can charge you for this if they are a registered tax agent or BAS agent. (In theory, they could do it for free, but why would they?)

Bookkeepers can also help you establish procedures and processes to ensure that all your financial data is captured and stored correctly. This will save you the hassle of rummaging through the third drawdown or a shoebox at the bottom of the wardrobe for your receipts and invoices come tax time.

Accountants can also prepare your tax returns and manage regular financial responsibilities. However, unlike bookkeepers, they can advise on complex taxation issues.

Many accountants also provide strategic business advice, and some can also offer guidance on personal finances if they have the required financial planning licences.

The essential difference is that while bookkeepers can perform everyday tasks for your business if you want more strategic advice to help you grow your business and minimise your tax, you should look to an accountant.

Which one does my business need?

Whether you need a bookkeeper or an accountant will depend on what stage your business is in and what you hope to achieve.

For instance, if you have a business with pretty straightforward finances, then perhaps a bookkeeper will meet your needs.

Whether you hire a full-time bookkeeper or simply employ a bookkeeper’s services as you need them will depend on how busy your business is. Do you send out many invoices, receive a lot of bills, and have a payroll to manage? If so, perhaps you need a full-time bookkeeper.

If, however, you don’t send out too many accounts or your needs are pretty straightforward, then a casual bookkeeper for a few hours a week might suffice.

You should also keep in mind that several cloud-based small business accounting programs can make account keeping very easy if you’re savvy with financial concepts and have an understanding of what needs to be done. Many of these can send out invoices, and some are linked to your bank account so that you can reconcile your income and expenses within a few minutes a week.

Accountants can generally perform most of the functions bookkeepers do. Still, they are usually more expensive, so it is a good idea to retain a bookkeeper for the more straightforward day-to-day work.

When you have more complex needs, you should engage an accountant.

If your business is growing (or you hope it will grow), your accountant can be an invaluable source of advice. They can advise on areas including cash-flow management, budgeting, strategic planning and identifying key performance drivers – that is, things that can have a significant impact on your profitability.

Accountants can also help with tax planning – structuring your finances so that you and your business don’t pay any more tax than you need to.

It is a good idea to seek an accountant’s advice at significant milestones for your business, such as taking on a partner, acquiring a vital asset, or selling the company.

Another time when you should engage an accountant is when you start your business.

You should seek advice on what form of business structure – a sole trader, a partnership, a company or a trust – would best suit your circumstances.

How to choose the right person to work with

Once you have decided whether you want a bookkeeper or an accountant, you need to find the right one for your business.

Accountants and bookkeepers need to be registered as tax agents or advisors, depending on precisely what they do for you. You can check their registration at the Tax Practitioners Board.

Also, check to see if they are a member of a relevant professional association. Many accountants will be members of a professional body that requires them to undertake yearly training and professional development activities to maintain a high standard of knowledge and skill throughout their careers.

Consider if you want a bookkeeper or an accountant with specific knowledge of your industry. At the minimum, you should try to find finance professionals who have worked with businesses similar to yours.

Also, be aware that accountants have specialities. Some are tax accountants, while others focus more on strategic business advice.

Before you hire an accountant or bookkeeper, make sure you meet them or chat with them and get a feeling for whether they are someone you get on well with and feel comfortable working with.

Finally, ask them how they like to be contacted. Are they happy to receive a quick impromptu phone call if you have a question, or do they prefer to schedule meetings – and then consider how this would fit in with the way you like to work?

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