Why you should have separate bookkeepers and tax accountants
A business requires accurate, clean books that are updated at least monthly. You have two options to achieve this goal: hire a professional or have a year-end accounting firm handle your bookkeeping.
It's OK to ask an outsourced accountant for help with your daily books.
Before we get into the reasons, let's first look at how the duties of accountants and bookkeepers differ.
Bookkeepers' duties vs. Tax Accountants
Bookkeeping duties
A bookkeeper's responsibility is to keep track of your company's daily transactions, preferably in an accounting program like Xero or QBO. This will allow you and your accountant to make better financial decisions.
However, the core tasks of a bookkeeper are usually:
Recognizing and recording financial transactions that involve business revenue and expenses
Invoices from suppliers to be paid
Invoice creation
Received payments are being processed
Calculating and paying sales tax
Reconciliation of bank and credit card accounts
Produce monthly financial statements (including balances, income statements, and cash flows statements)
Assisting in the processing of payroll in some cases
Bookkeepers are generally cheaper than Chartered Professional Accountants (CPA) and offer a cost-effective solution to keeping your books current over the long term.
Tax Accounting duties
Tax accountants verify a company's financial statements throughout the year and prepare the final reports necessary to file the company's annual tax returns.
This means that the core duties of a year-end accountant typically include the following:
To determine any year-end adjustments, review the financial statements for the fiscal years
Tax adjustments for charitable donations, meals, entertainment, and depreciation
Preparing and often remitting company tax returns
Many businesses use professional accounting firms to file their annual taxes during tax season. Your business could be at risk if your accountant handles your bookkeeping records.
Why not hire bookkeepers and tax accountants for the year?
You should consider hiring separate bookkeepers or tax accountants for these three reasons.
An extra pair of eyes can help prevent fraud and errors.
Your tax accountant can also do your bookkeeping, so they are less likely to make mistakes in the accounting process. Unfortunately, it's common for independent accountants or bookkeepers to profit from the trust and financials of business owners.
A Halifax accountant was recently accused of defrauding an organization he worked for nearly $1.5 Million.
This accountant, who was responsible for downloading bank statements from the company and financial reporting, was able to perform several "improper" and "unauthorized transactions.
Missing financial records (including unreported revenues received or excess cash available).
Bank statements altered
To hide the misuse of funds on his personal credit card account, he will make periodic repayments
Having a bookkeeper manage your books and a tax accountant reviewing your financial data at year's end will help you avoid potential mistakes.
This can not only prevent expensive penalties but also bring fraud to light. It will allow your business to reduce the risk of embezzlement, tax fraud, and other financial violations.
Tax accountants are experts in year-end and not daily financial activities.
You shouldn't trust a tax accountant to handle your bookkeeping, just as you wouldn't consult your skin doctor for a problem like a rheumatoid. While both dermatologists and gastroenterologists are qualified doctors, they have different specialties. Accountants are the same.
You can be confident that you are working with an expert in tax matters by hiring a tax accountant who focuses on tax law and tax return preparation.
While they are busy with debits and credits, professional bookkeepers (and outsourced accountants) also spend time dealing with everyday business transactions. So you can trust them to keep your books current and accurate.
Bookkeepers can offer a more consistent service.
Businesses tend to have December 31 and March 31 fiscal year-ends, which means they share the same tax deadlines. As a result, many accountants need to be more focused during tax season.
During this time, you might have difficulty connecting with them
They could focus on your bookkeeping intermittently or for several months.
You could lose real-time access to your cash flow and other financial data.
Your business' success depends on having accurate and timely books. Working with separate bookkeepers or year-end accountants gives you more financial oversight. It also ensures that your books are consistently updated from month to month.
Your bookkeeper can also communicate directly with your accountant for financial statements and other questions. This will allow you to focus on your business growth and reduce tax season stress.
Are you looking for a reliable, stress-free, and year-round bookkeeping solution? We can help.
