Bookkeeper or accountant - which do you actually need?
By Karen Dunford5 min read
One of the most common questions I get from sole traders is some version of: do I need a bookkeeper, or an accountant, or both? And the honest answer is - it depends. Sometimes you need one, sometimes both, sometimes neither yet.
Here's how to tell which you actually need, what they each do, and how to avoid the most common mistake (paying for both and getting half of each).
What a bookkeeper actually does
A bookkeeper runs your day-to-day financial records. The ongoing rhythm of your business.
- Reconciling your bank transactions
- Coding income and expenses to the right accounts
- Sending invoices, chasing overdue ones
- Running payroll if you have staff
- Filing GST returns
- Sole trader end-of-year returns
- Keeping your books in a state your accountant can pick up cleanly if you have one
A good bookkeeper also teaches you the rhythm so you understand what's in your own books. That's the bit that separates bookkeeping from data entry.
What an accountant actually does
An accountant works at a higher level. The annual rhythm and the strategic moments of your business.
- Preparing financial statements for Ltd companies
- Filing the annual return (IR4) for Ltd companies
- Tax planning and structuring advice
- Setting up Ltd companies and trusts
- Representing you in formal IRD matters
- Providing assurance/audit work where required
Accountants have qualifications and professional indemnity insurance that bookkeepers don't. For anything that requires those - audited statements, formal tax disputes, complex structuring - you need an accountant.
Who needs which (and when)
If you're a sole trader doing under $60,000 a year
You probably don't need an accountant yet. Sole trader returns are something a bookkeeper can prepare and file (subject to scope). A bookkeeper running your books monthly, or hourly when you need a hand, is usually enough. If your situation gets complex - trusts, investment properties, big asset purchases - that's when an accountant earns their fee.
If you're a sole trader doing $60,000 to $200,000
A bookkeeper is the foundation. An accountant becomes useful for the annual review and tax planning - they can help you decide whether to stay as a sole trader or incorporate as a Ltd company, and they handle the complex bits if you do.
If you're running a Ltd company
You probably need both, but in different proportions. Your bookkeeper runs the books day-to-day. Your accountant handles end-of-year - the financial statements, the IR4, the tax calculation. The bookkeeper keeps the books in a state the accountant can pick up cleanly, which keeps the accountant's time (and your fee) down.
If you've got staff, trusts, or property
You definitely need both. Payroll on staff. Trusts have their own annual returns and accountant work. Property has depreciation, capital costs, mixed-use questions. None of this gets simpler over time - having both a bookkeeper for the rhythm and an accountant for the strategy is the arrangement that works.
The most expensive mistake
Paying an accountant for bookkeeping work. Accountants charge accountant rates - which are usually two or three times bookkeeper rates - and they don't want to do the day-to-day reconciliation work. So you end up paying premium rates for routine work, and the accountant is bored and slow on it.
The right division of labour: bookkeeper for the rhythm, accountant for the strategic moments. Bookkeeper keeps the books tidy so the accountant's time is spent on what they're actually good at.
How to find good ones
For a bookkeeper: look for someone who specialises in businesses like yours, will explain things in plain English, and is willing to teach you. Bookkeeping certifications worth looking for in NZ are ICNZB (Institute of Certified NZ Bookkeepers) and Xero Partner status.
For an accountant: ask other business owners in your industry for recommendations. Chartered Accountants ANZ membership is the qualifier. Smaller practices tend to be more accessible for sole traders than the big firms.
And: if you're working with a bookkeeper, they should be happy to recommend an accountant when you need one. I work with a network of NZ accountants and refer clients out when they need that kind of help. Bookkeepers who try to keep all the work themselves and pretend to be accountants are a red flag.
If you're trying to work out what you need
Book a free 30-minute chat. Tell me what you're running, how big, what your situation looks like. I'll give you a plain answer about whether you need a bookkeeper, an accountant, both, or just to keep doing what you're doing.
- Karen