Every business needs a clean, accurate set of books that are (ideally) updated monthly. To achieve that objective, you can either hire a professional bookkeeper or have a year-end accountant take care of your bookkeeping.
There’s nothing technically wrong with asking an accountant to handle your day-to-day books. We consider it best practice, however, to work with separate bookkeepers and year-end accountants.
Before diving into the reasons why let’s first consider how the duties of bookkeepers and accountants actually differ.
Duties of bookkeepers vs. year-end accountants
It’s a bookkeeper’s responsibility to record your company’s daily transactions (preferably in an accounting software general ledger) so you and your accountant can use the information to make better financial decisions.
That said, a bookkeeper’s core duties usually include:
- Categorizing and recording financial transactions involving business expenses and revenue
- Paying supplier invoices
- Creating customer invoices
- Processing payments received
- Calculating and remitting sales tax
- Performing bank and credit card account reconciliations
- Generating monthly financial reports (including balance sheets, income statements and cash flow statements)
- Assisting with payroll in certain cases
Because bookkeepers typically charge less than Chartered Professional Accountants (CPA), they offer a more cost-effective way to keep your books up to date in the long term.
Year-end accountants both verify the financial statements representing a business’s bookkeeping throughout the year—and prepare the final set of statements required to file that company’s annual tax returns.
That means a year-end accountant’s core duties typically include:
- Reviewing financial statements for the fiscal year to determine any year-end adjustments
- Performing tax adjustments for items like charitable contributions, meals and entertainment, and depreciation
- Preparing (and often remitting) company tax returns
Most businesses work with professional accounting firms during tax season to help file their annual taxes. If your year-end accountant also handles your bookkeeper records, you could be exposing your business to certain risks.
We’ll explore these further in the next section.
Why hire separate bookkeepers and year-end accountants?
There are 3 excellent reasons why you should consider working with separate bookkeepers and year-end accountants.
1. Having an extra set of eyes helps prevent errors and fraud
If your year-end accountant also does your bookkeeping, they’ll be less likely to catch their own mistakes across the accounting process. Worse, it’s not unheard of for an independent bookkeeper or accountant to take advantage of a business owner’s trust and financials.
One Halifax accountant was recently charged with defrauding the organization he worked at for almost $1.5 million.
Because he was responsible for both downloading company bank statements and financial reporting, this accountant was able to carry out a series of allegedly “improper and unauthorized transactions” involving:
- Misstated financial records (including underreported revenues received and excess cash available)
- Altered bank statements
- Periodic repayments designed to conceal the misappropriation of funds to his personal credit card account
By having a bookkeeper manage your books—and an accountant review your financial data at the end of each year—you’ll benefit from having two sets of eyes peeled for potential errors and oversights.
Not only can this prevent costly penalties, but it can also help bring fraudulent activity to light, allowing your business to mitigate the risk of tax fraud, embezzlement, and other financial violations.
2. Tax accountants specialize in year-end, not day-to-day financial activities
In the same way that you wouldn’t consult a skin doctor about your ulcer, you shouldn’t rely on a tax accountant for your bookkeeping needs. Dermatologists and gastroenterologists may both be qualified physicians, but they specialize in different areas—and accountants are much the same.
By hiring a separate year-end accountant whose focus is tax return preparation, tax law, and optimizing tax reductions, you can feel confident knowing you’re working with authority on all things tax-related.
Professional bookkeepers (and financial accountants) meanwhile spend their time immersed in debits, credits, and everyday business transactions. That means you can rely on their having the knowledge, expertise—and time—to keep your day-to-day books accurate and up to date.
3. Bookkeepers can provide more consistent service
Many businesses tend to have a December 31 or March 31 fiscal year-end, which results in businesses sharing the same tax deadlines. Many accountants are exceptionally busy and distracted come tax season.
If you rely on a year-end accountant to do your bookkeeping:
- You could have trouble connecting with them during this time
- Their focus on your bookkeeping could be intermittent or put on hold for several months
- Real-time visibility into your cash flow and other financial information could be impacted
Having accurate, timely books is fundamental to the success of your business. Not only does working with separate bookkeepers and year-end accountants give you greater financial oversight, but it also ensures your books are updated consistently from month to month.
As a bonus, your bookkeeper can liaise directly with your year-end accountant to provide financial statements and answer their questions. That way, you can stay focused on growing your business and avoid any tax season stress.
Looking for an accurate, stress-free, year-round bookkeeping service? Enkel can help.