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.

Ways to Manage Cash Flow

I've already written about the importance of a cash flow plan. So, did it make you run straight to your desk and start planning? Keep in mind, most cash flow plans are a forecast of what you see happening in the next 12 months, or even as little as 6 months in some cases. Base it on the goals you have set for your business.

There are many factors that dictate what will happen in the time frame you selected. There are few things we know for certain, such as the cost of employees, loans, how quickly your customers pay their bills, and what your turn around time is to pay your vendors. Factor in things like future purchases and supplies, new employees and any capital expenditures, and, of course, paying yourself!

Some of my clients use software that sends out automated reminders to their clients. This way they are always aware of payments coming into their account and how late they are. One such method is to use an accounting software linked to PayPal.

Other ways to ensure your cash is there when you need it are:

• Ask for deposits when receiving orders; generally people don't mind paying 50% up front.
• Manage your Receivables properly; if your terms are net 30 days, ensure you receive your payments when due by possibly offering early payment discounts.
• Ensure a quick turnaround on inventory by not purchasing an abundance before it’s required.
• Invoice on a daily basis.
• Analyze which methods of receiving payment work fastest for you. There are so many ways to get payments today. For those on the road, there is even Square for debit and credit card payments upon delivery. PayPal, cheque. You name it!
• Never pay your own vendors until the payment terms are up. If you know a vendor will accept payment terms past 30 days, use this opportunity.

Always update your business plan (hopefully you have one of those!) and include a cash flow plan.

Need help? Contact me and I can help you prepare one.