Bookkeepers and Accountants Are Not the Same

Your successful small business needs both a bookkeeper and an accountant. And there’s a reason why they won’t be the same person.

While some skilled bookkeepers and accountants may, in fact, be capable of doing each other’s work, an accountant’s services cost considerably more than a bookkeeper. There are other significant differences to be aware of.

A bookkeeper helps you maintain the ongoing financial recording of transactions to keep your business running smoothly. Specifically, they might:

• Process and record invoices, receipts, payments, and other transactions
• Process transactions for payroll and maintain those systems
• Set up, maintain and review accounting systems and processes

Some bookkeepers (including me) may also look after these additional activities for you:

• Reconcile accounts and prepare reconciliation reports
• Manage accounts receivable and accounts payable
• Prepare working financial statements

An accountant, on the other hand, provides analysis and professional advice, and keeps you compliant with laws and regulations. Specific activities which an accountant might do are:

• Analyze performance and create financial projections
• Provide tax advice and planning
• Help with new business set-up
• Audit records for compliance
• Prepare financial reports
• Give financial management advice

Both roles are extremely important to the success of your small business. They need to communicate well with each other in order for you to maximize on their contributions.

Beyond Data Entry

It’s good you’ve invested in having someone (an employee or a contractor) dedicated to doing your routine entry of invoices and vendor payments. You’re too important to your business to do that stuff yourself.

Now that you aren’t seeing all the details, though, you might be finding it more difficult to make decisions about day-to-day operations and expenses.

Perhaps there’s another role you need to fill: someone to do your payroll, reconciliations and monthly financial statements. If you have a qualified, experienced person looking after these activities, they can help get your head out of the trees and help you see the forest… with valuable insight on how your business is doing. A good person in this role will notice concerning trends and bring them to your attention before they become a problem.

Where can you find such an experienced person? Ask me... or your accountant.

Should I Buy or Should I Lease My Next Vehicle?

As a business owner, I have debated this question many times over the years. I have both leased and purchased, and I like to get a new vehicle every 3 or 4 years... whether I really need it or not.

My advice about making this decision is: speak with your accountant.

There are many ways to handle both the usage and the HST (Nova Scotia) you can claim. Factors, such as whether you are a Sole Proprietor or Corporation, will impact this decision.

• Purchased vehicles become assets and part of your net worth.
• Lease payments become expenses which can be written off using the CRA rules.

Lease payments are generally lower than your payments if you buy, which makes them attractive. Buying might have higher payments but you are making payments on an asset that eventually will be paid off, meaning you will be debt free until you require a new vehicle.

Ideally you don't want to take out a loan to pay off a vehicle that is not expected to last at least as long as the term of the loan. Dealerships may offer longer terms for repayment to make you think the cost is reasonable (smaller payments), however after 5-6 years, the warranty is gone and problems start. A vehicle will depreciate if it's an asset, and generally by 30% in the first year.

Leases have mileage limitations so, based on your future use of the vehicle, this must be considered. There are also penalties if you wish to get out of a lease sooner that its term. Sometimes the lease rates are higher than purchase rates.

Here is a calculator from CRA which will help you compare the costs.