When you run a business and/or have an investment portfolio, it’s important to know whether you need a business accountant, a financial advisor, or both. While their roles overlap in some areas, each professional offers unique services. Here’s a breakdown to help you decide which one you need.
What is a Business Accountant?
A business accountant specializes in many things including tracking, analyzing, and reporting financial transactions within a business. Their focus is on past and present financial data, helping businesses and individuals understand financial performance including the profit and loss and balance sheet.
Key Responsibilities of a Business Accountant:
- Bookkeeping and Record Keeping: Managing daily financial transactions and ensuring accuracy in the financial statements.
- Tax Preparation and Planning: Preparing and lodging tax returns, identifying tax deductions to minimize tax liability.
- ASIC and ATO Compliance: Ensuring regulatory compliance and supporting internal or external audits.
- Financial Analysis and Reporting: Providing insights into profitability, cash flow, and financial health.
When to Hire a Business Accountant:
- For managing daily business transactions.
- Assistance with tax lodgement, especially for complex returns.
- Preparing and implementing a tax strategy to save tax
- Structuring your business
- Budgeting and cash flow analysis
What is a Financial Advisor?
A financial advisor focuses on wealth management, investments, and long-term financial planning, helping clients grow their wealth and achieve specific financial goals. While business accountants focus on past and present, financial advisors look toward future financial growth and asset building.
Key Responsibilities of a Financial Advisor:
- Investment Advice: Creating tailored investment portfolios for clients’ goals and risk tolerance. For example, risk averse clients may prefer bonds or term deposits to small cap shares.
- Retirement Planning: Establishing savings goals, analyzing retirement options, and adjusting investment strategies. Sometimes the financial advisor will need the services of a business accountant who will consider the tax consequences of each strategy.
- Estate Planning and Wealth Transfer: Assisting with estate planning for wealth preservation. Note that the business accountant can assist with this as well.
- Risk Management and Insurance Planning: Recommending insurance products to protect against unforeseen events.
When to Consult a Financial Advisor:
- For investment advice or retirement planning.
- When planning for long-term goals, like buying a home or funding education (again, a business accountant can help with this).
- For estate planning and diversifying investment portfolios.
Key Differences Between Business Accountants and Financial Advisors
- Past vs. Future Focus: Business accountants focus on past transactions for tax and compliance, while financial advisors emphasize future planning.
- Specialization: Accountants are experts in tax law and ASIC and ATO compliance; financial advisors specialize in investments and wealth management.
- Qualifications: Accountants often hold CPA or CA designations, while financial advisors might hold CFP or CFA qualifications and be licensed for investments.
When You May Need Both
For business owners or high-net-worth individuals, consulting both a business accountant and a financial advisor is often valuable. For instance, a business owner could require a financial advisor to oversee investments and retirement planning while guaranteeing tax-effective methods are offered, and a business accountant to ensure tax compliance. Their combined expertise can offer a more holistic approach to tax saving and asset creation.
Choosing between a business accountant and a financial advisor depends on your financial goals. Business accountants are essential for financial statements, taxes, and compliance, while financial advisors excel in wealth management. Having both at your disposal should ensure a successful and prosperous financial future.
