Difference Between An Accountant and A Bookkeeper
This article is originally from here:
https://www.globalfromasia.com/accountingandbookkeeping/
All too often we can’t wait to get our Hong Kong limited open.
You’ve been enjoying the Global From Asia podcast and blogs here on the site. Now you are looking into what are the ongoing costs.
We had a popular post for the Upkeep for HK company, today we are going to focus specifically on:
What is the difference between an accountant and an auditor?
Drink so coffee (or tea) and don’t sleep on me here. Yes, this stuff can get dry – but the more we understand it, the better business owners we can be!
Accountant Definition
What is an accountant?
Think there are 2 cases.
Case one is the accountant as a bookkeeper. He or she will receive all your financial statements, either by paper or online access. They will setup your books and chart of accountants. You will then watch in awe as they classify your transactions in different income and expense accounts.
Bookkeeping should be upkept throughout the year. Ideally real time. Of course there are many of us with not tons of activity on a daily basis and we can’t afford to have a full time accountant. So I recommend weekly.
It’s not just for the work, but also for you as a business owner. To look at the numbers, the reports, the summary and see your business as a dashboard.
So this type of accountant is a bookkeeper.
The second option is the accountant as a tax form filing specialist. They specialize in a certain geography / government. Let’s say for here its Hong Kong. They know what all the different tax forms are, how to fill them out. Also, if they have experience, they will be able to tell you how to best keep the forms filled out. How to optimize your tax strategy.
This type of accountant is I believe what most of us think of when we hear a tax accountant. Having a good grasp of that government’s tax law and advising clients how to file for their personal and/or businesses.
Auditor Definition
Auditor, for many Americans (myself included) will cringe. We all hear about an IRS tax audit. The mental picture I get is a group of government officials in suits pounding on your office door to do a sudden check on your books. The business owner rushing to shred all the documents before they break the door down.
Do you get such a dramatic mental picture as that?
Well, that isn’t what we’re doing here – at least in the Global From Asia – Hong Kong tax sense. An audit here is one you pay a Hong Kong CPA (certified professional accountant) to check your books.
This auditor is the same as those who are rummaging through your shredded documents but this time you pay them to do it. Or at least you’re required by the Hong Kong Internal Revenue Department (IRD) to do so.
They will not enter your transactions into an accounting system or excel. That you should have done already. What they will do is check over your financial statements such as your profit and loss statement and balance sheet. They’ll see if it makes sense. Such things as your margins, your expense account sizes in comparison to your revenue numbers. Are you hiding something.
They are to snoop around in your financial statements, and your transaction history looking for things that may not add up.
This is their job. And they are using their expertise – AND LICENSE – to do it.
You may ask yourself, why would they dig into it if I’m the one paying them. Wouldn’t they want to keep me as the paying client happy?
You would think so – but the Hong Kong government gives them a license. Their job is on the line. If they don’t do their job and the IRD checks it later and feels the CPA was negligible, they jeopardize their license.
Make sense?
An Accountant Can Also Be An Auditor
You can use the same person to do both of these tasks. They will accept it, because it means more money for them!
It may make sense too. They will understand the books as they have been working with you on entering the transactions and speaking to you throughout the year on questions you have. You should have a good regular communication flow with your accountant. Alert them of new products, services, and other financial related changes in your business. Taking a new business loan? Might be a good time to alert your accountant, so they can add that as a new account in your bookkeeping system.
Will You Save Money If You Use An Accountant As Your Auditor?
I’m sure you’re wondering, will you save money if you combine your accountant and auditor? I would say yes. There are a few ways you can say it will save you money:
1) They can give you a lower bundle price than separating the services.
2) They can save time in the audit as they know the books already.
3) You will spend less of your own time re-explaining the situation 2 times.
But, you also need to remember, for a Hong Kong company audit, you need a Hong Kong local accredited CPA. Hong Kong, as we have found out from these blogs in the past, is not the cheapest. Check out cost of living in Hong Kong article for examples. So of course those costs will reflected in your pricing.
You can use an accountant anywhere in the world. you may save money on the accounting side if you outsource or have your own staff do it. Then you only use a local Hong Kong CPA to check over the books and submit the auditor’s report.
Doing that may save money as a total bundle price – but dollar for dollar – the coordination and back and forth of your own time may drag you down a bit.
It comes down to how well organized you can be.
What To Look For In An Accountant for your Hong Kong Books
So we discussed the differences, now what should you look for in an accountant. I’ve seen some people I have worked with who use an American based accountant to do it.
You can use an accountant based anywhere in the world.
While we can provide this service and would love to work with you on your case. Yet to be clear, your accountant can be someone you find on Upwork. You pay to have someone do your transactions entry in Xero or Quickbooks. Also we’re a Certified Quickbooks Advisor in Hong Kong, so look for that from others you may hire.
Some tips in looking for your accountant:
Multi-currency experience.
The beauty of Hong Kong for your global business is the multi-currency accounts. But for accountants, that is an added complexity. Ask your accountant if he or she has ever done bookkeeping for someone who has a wide range of currencies, and multi-currency bank accounts.
Do you have multiple entities in other countries?
Do you also have a USA company or mainland Chinese company? Maybe you have an outsourcing center in Philippines. Who is doing the accounting there? What is the relationship of those companies to this company? Will you have those books done by this same accountant, or will you have a separate bookkeeper for that country? This is something the accountant you are looking to hire will need to know.
Do you have a lot of transactions?
Are you an online based business with a lot of Paypal and merchant account transactions? Especially in B2C, you will have a lot of small purchases. Do you expect your accountant to have experience with these e-commerce payment systems? Many accountants are not familiar with this and you should keep on top of this before it gets out of hand.
Do you expect them to be “online” based or “offline” based?
As mentioned in point 3, many accountants still haven’t fully embraced the internet and computers. Don’t laugh! At least in Hong Kong, many still are getting a grasp of keeping on top of their email inbox! In your communication with the potential accountant, see what types of communication methods they prefer.
Can they work direct with your online banking systems?
When doing the transaction entry, can they work direct with your online banking systems? Again, technology. I imagine if you’re reading this blog post – then you are tech savvy. More than many of the accountants you may find out there! I am not trying to make a jab. Spoken from experience, do you expect the accountant to be able to login to your online banking with their own logins? Will you be OK with sending them a bunch of PDFs? Heck, maybe some will even want you to mail them the physical paper statements!
This is just a small list. Of course you have to trust them! And you have to agree with the way to communicate. Don’t get into the deal to only get frustrated with them later on when they are slow to respond to your emails. The only way I can reach a lot of accountants is to call them and schedule an appointment at their office in Hong Kong!
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