From bookkeepers to accountants to CFOs, there are several roles that fall under the great umbrella of ‘financial management’. They all have the same ultimate goal: make sure your business’ financial future is sound. So, some of their professional skills may overlap, but it doesn’t mean their core functions are interchangeable.
We’ve compiled this handy guide to get rid of the confusion once and for all. We’ll show where each role shines — you’ll be able to identify which among these financial services is the one your business needs.
Bookkeepers vs Accountants
Bookkeepers and accountants have it worst with regard to making themselves distinct as a profession; if any of the financial service roles are often mistaken for the other or thought of as basically the same, it’s these two.
Let’s not lie, there are good and bad bookkeepers AND good and bad accountants. But all things being equal, the main difference between a bookkeeper and an accountant is the education level and thus the level at which they interact with your financial data.
Bookkeepers are in charge of the day-to-day recording and organising of your business’ finances and other transactions like invoicing and tracking payroll. They are the source of data entry and coding, so they’re responsible for populating the accounting system, spreadsheets and databases with correct data.
Have your bookkeepers record:
- Invoices
- Payroll
- Receipts and bills
- Transactions
While bookkeepers are responsible for the daily recording and organisation of a business’ finances and transactions, an accountant’s core responsibility, lies in analysing and reporting on the compliance of the bookkeeper’s records to business owners and investors. That is not to say that Bookkeepers are not able to do this, but rather the majority of bookkeepers are not trained or experienced in compliance and financial analysis to the level of, say, Chartered Accountant or CPA.
Accountants are generally in the best position to advise decision-makers on how to handle their finances. This aside, the majority of Australian Small Business Entities (SME) only interact with their accountants once or twice a year during Tax time, with the majority of accountants seen as having a stronger understanding of tax laws and general compliance than a bookkeeper.
Expect the following from your accountants (and some senior experienced Bookkeepers):
- Financial statements and basic reports (profitability, budgets, etc.)
- Reconciliation (ATO accounts, Banking, Debtors and Creditors, Payroll, etc.)
- Reviews of depreciation
- Tax returns and compliance support
- Year-end financial compliance
Why is it easy to mix up their roles?
While they act in different capacities to ensure the financial health of a business, an accountant often oversees or reviews the activities of a bookkeeper, especially at the end of the financial year. So, it stands to reason that an accountant needs to understand bookkeeping.
Speak with a trustworthy financial services provider to see if your business needs to distinguish between the two roles when hiring or if you could outsource services to satisfy your bookkeeping and accounting needs.
Chief Financial Officers (CFOs)
Now that we’ve cleared up the misunderstanding between bookkeepers and accountants, where does the chief financial officer or CFO fit in? What key role does it perform in a business that makes it distinct from bookkeeping and accounting?
A CFO’s main role concerns the financial and commercial future of a business; they have several years of experience working across different industries and often in large companies, and they work closely with the CEO to ensure that it’s a future that involves growth and stability in the long run.
CFOs are in charge of dispensing strategic advice about scaling business operations while also keeping investors and financiers happy.
Given that their financial analysis and subsequent advice could cause impacts that will be felt all over the business’ hierarchy in the present and in the future, a chief financial officer is nearly always a qualified accountant with a good amount of experience and accomplishments in the industry.
A chief financial officer is in charge of:
- Analysing company finances for providing long-term business planning
- Crafting a merger and acquisition strategy
- Devising debt and equity, financial, tax and risk strategies
- Dispensing strategic advice regarding your business’ finances
- Helping acquire capital investments and maintaining a stable capital structure
- Interpreting management reports
- Maintaining connections with financial institutions
- Managing cashflow
- Overseeing company investments
How is a CFO different from an accountant?
We’ve already stated that accountants can analyse reports and interpret data — what makes the CFO so special? The main difference between an accountant and a CFO lies in the way they apply their analysis.
Accountants are process-oriented. The information they infer from the bookkeeper’s records will be used to find and correct inefficiencies in the system so the quality of data improves. They audit (internal and external) processes and compile daily, quarterly and annual reports.
Chief financial officer services have a more commercial purpose than that of accounting or bookkeeping. CFOs are responsible for devising long-term growth plans that the business can pursue, such as growth, succession planning, capital investment and financial planning.
A great CFO will look beyond the reports generated by the accountant to identify and understand a business’ core levers and strengths, weaknesses and efficiencies, and figure out how to use all that information to the company’s advantage.
CFOs act as a 2IC or co-pilot to help business owners navigate issues and bounce ideas around as they have already likely experienced a lot of your issues in their own established careers. In other words, it’s practical experience that makes someone a reliable chief financial officer — a good CFO will have an accounting background, but a lot of good Tax/Compliance accountants don’t always make good CFOs.
CFOs and the true advisory skills they provide are highly specialised and honed from ‘real-world’ experience, but small and medium businesses won’t necessarily need them around full-time. You could still benefit from their financial expertise and scale your business, however, by outsourcing your CFO solutions to a provider like Your Finance Department.
