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What is Accounting

Accounting is a crucial aspect of managing your small business’s finances. It involves the systematic recording, summarising, analysing and reporting of financial data and transactions to help you make informed decisions and meet your various financial obligations.

In simple terms, accounting is the financial compass that guides your small business. It’s not just about numbers; it’s about making informed decisions, staying compliant, and achieving financial stability.

Accounting gives you a clear view of your business’s financial health, identifies growth opportunities and optimises your tax strategy. Accounting also helps you understand your profit margins, controls costs and manages cash flow.

Accountants and bookkeepers play distinct but complementary roles in managing a business’s financial performance, operations and management. Here are the key differences between the two.
Roles and Responsibilities
Roles and Responsibilities

Bookkeeper

Bookkeepers are responsible for the day-to-day financial transactions of a business. Their primary tasks include recording financial data, such as sales, purchases, expenses, and payments, into an accounting system. They also reconcile bank statements, manage payroll, and maintain financial records. Bookkeepers focus on the accurate and organised recording of financial data.

Accountant

Accountants take a more comprehensive and analytical approach to financial data. They analyse, interpret, and summarise the financial information provided by bookkeepers. Accountants prepare financial statements, such as income statements, balance sheets, and cash flow statements. They also provide financial insights, tax planning, and strategic advice. Accountants play a crucial role in helping businesses make informed financial decisions and ensure compliance with tax laws and regulations.
Education and Certification​
Education and Certification​​

Bookkeeper

While formal education and certification are not always required to become a bookkeeper, many bookkeepers choose to pursue relevant training and certifications, such as becoming a Certified Bookkeeper (CB) or obtaining an associate degree in accounting or bookkeeping. Bookkeepers often have a solid understanding of basic accounting principles.

Accountant

Accountants typically meet more extensive educational requirements. They often hold a bachelor’s degree in accounting or a related field and may pursue advanced degrees or professional certifications such as a Certified Practising Accountant.
Analysis and Interpretation
Analysis and Interpretation​

Bookkeeper

Bookkeepers focus on the accurate recording and organisation of financial data. While they may perform some basic financial analysis, their primary role is data entry and record-keeping.

Accountant

Accountants are trained to analyse financial data and provide valuable insights. They can help businesses understand their financial performance, identify trends, make strategic decisions, and optimise tax planning. Accountants often work closely with business owners or management to offer financial advice and planning.
Tax and Regulatory Compliance
Tax and Regulatory Compliance

Bookkeeper

Bookkeepers ensure that financial records are accurate and up to date, making it easier for accountants to prepare tax returns and comply with regulatory requirements. They may also assist in maintaining records for tax reporting.

Accountant

Accountants have a deeper understanding of tax laws and regulations. They help businesses optimise their tax strategy, prepare and file tax returns, and provide guidance on tax compliance. They are well-versed in Australia’s tax landscape and can provide practical advice to ensure your business is compliant with ATO regulations.
Retinue clients enjoy access to both bookkeepers and accountants as part of their standard package.

What are financial statements?​

Balance sheets, income statements, and cash flow statements generally make up the ‘financial statements’ of a small business and they are three of the most important documents that outline a business’s financial health, performance, and cash flow. Each of these statements provides different insights into a company’s financial situation.

Balance Sheet

A business balance sheet is a snapshot of a company’s financial position at a specific point in time, typically at the end of an accounting period (e.g., a month, quarter, or year). It details the following key elements:

Assets

Resources and items of value owned by the company, such as cash, accounts receivable, inventory, property, and equipment.

Liabilities ​

Debts and obligations owed by the company, including loans, accounts payable, and accrued expenses.

Equity

The residual interest in the assets of the company after deducting liabilities. It includes owner’s equity, retained earnings, and other components.
The fundamental accounting equation is reflected in the balance sheet: Assets = Liabilities + Equity. This equation ensures that the balance sheet remains balanced

Income Statement

Also known as the Profit and Loss Statement (P&L), an Income Statement provides a summary of a company’s financial performance over a specific period, such as a month, quarter, or year.

Typically it will detail:

Revenue

The total income generated from the sale of goods or services.

Expenses

The costs and expenditures incurred to operate the business, including salaries, rent, utilities, and other operating expenses.

Net Income (or Loss)

The result of subtracting total expenses from total revenues. A positive net income indicates a profit, while a negative net income indicates a loss.
The income statement helps assess whether a business is profitable and how efficiently it is managing its expenses.

Cash Flow Statement

A cash flow statement provides a detailed breakdown of a company’s cash inflows and outflows over a specific period. It is typically divided into three main sections:

Operating Activities

This section accounts for cash flows generated from the company’s primary operations, such as sales and expenses.

Investing Activities

This section records cash flows related to the purchase or sale of long-term assets, like equipment or investments.

Financing Activities

This section includes cash flows related to the company’s financing, such as taking out loans or repaying debt.
The cash flow statement helps assess a company’s liquidity, its ability to generate cash from its operations, and its dependence on external financing.

These financial statements are essential tools for business owners, investors, lenders, and other stakeholders to understand a company’s financial position, profitability, and cash flow.

They are also crucial for decision-making, financial planning, and regulatory reporting. Analysing these statements collectively provides a comprehensive view of a company’s financial performance and allows for informed, strategic forward planning.

Retinue clients receive monthly reporting on the financial health of their business, with detailed analysis and recommendations from our qualified accountants.

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How much do accountants charge?

Accountant fees can vary significantly based on several factors, including the complexity of the work, location, experience and qualifications and the size and nature of your business. Here are some general guidelines to help you understand the potential cost of hiring an accountant:

Hourly Rates

Many accountants charge on an hourly basis, with rates typically ranging from $100 to $350 per hour (or even more for highly specialised services).

Monthly or Annual Packages

Accountants may offer ongoing services, such as financial management, accounting, and tax planning, on a monthly or annual retainer basis. These packages can vary in cost based on the level of service and the size of your business.

Business Size and Complexity

The cost of accounting services may depend on the size and complexity of your business. A small sole trader may pay less for accounting support compared to a larger business with multiple locations, employees, and complex financial transactions.

Services Required

The specific services you need will also impact the cost. Simple tasks like preparing individual tax returns are typically less expensive than complex services like lodging BAS and GST statements and preparing financial statements.

Experience and Qualifications

Accountants with more experience or higher qualifications, such as Certified Practising Accountants (CPAs) or Chartered Accountants (CAs), may charge higher rates for their expertise.

While fees are a major factor when selecting the right accountant for your business, also consider the value that a qualified accountant can provide in terms of financial management, tax optimisation, compliance, and overall financial health. While cost is an important factor, a good accountant should also be a trusted, proactive and long-term adviser to your business.

FAQ

Accounting involves recording, summarising, and analysing financial transactions in your business. It’s crucial for tracking income, expenses, and ensuring compliance with tax and regulatory requirements. Accountants help prepare important financial documents and help business reporting to meet your obligations and help you make informed financial decisions.
It’s not mandatory, but having an accountant can provide significant benefits. They can ensure accurate financial records, help with tax compliance, offer financial advice, and optimise your business’s financial health.
Outsourcing your accounting can offer a range of benefits for your business. From reduced staffing costs to ready access to a team of expert accountants, savvy outsourcing can help set the financial foundations of your business while you focus on what you do best – growing your business. It’s the smart way to reduce errors, guarantee tax compliance, and free up your time.

Accountants can prepare a wide range of financial documents and reports to help businesses manage their finances, comply with regulatory requirements, and make informed decisions. Some of the key financial documents and reports that an accountant can prepare include:


• Income Statements (Profit and Loss Statements)
• Balance Sheets
• Cash Flow Statements
• Budgets and Forecasts
• Tax Returns
• BAS Lodgements (Business Activity Statements)
• PAYG reporting
• Superannuation Guarantee reporting
• Financial Projections


Depending on your industry, business turnover, size and location other reports may be required. It’s best to work with a professional accountant to make sure all of your bases are covered.

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