How to Choose a Bookkeeper in New Zealand
How to choose a bookkeeper in NZ
This blog is about what to look for when engaging with a bookkeeper as a contractor, where it can be a better solution than using an inhouse resource.
Why outsource bookkeeping?
What does a bookkeeper do?
How to know if a bookkeeper is GOOD?
Other bookkeeper considerations
Why outsource bookkeeping?
These are the main reasons our clients tell us they choose to outsource their bookkeeping:
Privacy
There may be concern with inhouse staff potentially having access to the business financial information.
Growth
It's common for a company director to find themselves still spending time completing bookkeeping tasks as their business grows. There may not enough work for an inhouse position, or space for a workstation. Outsourcing bookkeeping will free up director time to focus on higher priorities.
Efficiency
If an employee tasked with bookkeeping does not enjoy it and is not suited to the work there is a risk the work will not be done in a timely manner because it’s always falling to the bottom of the priority list.. Often the work takes more time that it should and may not be using best practice.
Outsourcing bookkeeping, even temporarily, provides opportunity for the work to be “Sized” to confirm what the scope of the tasks really are. In one situation a 20 hour a week part-time position was converted to 2-3 hours a week bookkeeping with one of our team. This was unusual but as specialist Xero bookkeepers we do find it’s common to achieve a significant reduction in time compared to inhouse.
Restructure
Where a business is restructuring, outsourcing the bookkeeping can be a point of stability while other roles are defined.
The most common scenario is when someone is moving on from the business who has been there a very long time. Bringing in a specialist bookkeeper is an opportunity to implement new processes and best practice and to make it easier to for any new employee that might be coming in.
What does a bookkeeper do?
Bookkeepers and Accountants sometimes do the same work, but have a different skill set. In general a bookkeepers role is to record transactions and keep you financially organised, while accountants provide analysis, tax advice and business advisory.
The ICNZB has a useful resource outlining the main tasks bookkeepers usually carry out.
Below I have described what might be differences between Bookkeeper and Accountant services from my own perspective at Living Business. We are primarily Transactional Bookkeepers working to support the relationship our clients have with their accountants.
Working with Data in Xero
Bookkeeper – Transactional
- Keeping track of transactions in Xero
- Making sure entries are timely and accurate
- Coding in a way that makes sense for the business and their accountant
- Using best practice process to minimise risk of data entry errors, and to maximise speed and efficiency.
- Filing supporting documentation
- Best Practice reconciliation with all types of transactions
Accountant – Analytical and Tax Compliance
- Review data in Xero for trends, anomalies and exceptions.
- Provide analysis of data to support business decisions
- Review documentation for compliance and adjustments required
- Efficient data extraction for Financial Statements.
- EOY journal updates to keep Xero data as an accurate source of truth.
Tax
Bookkeeper – Transactional
- Regular filing of GST and PAYE returns
- Reminders to business for payment due and other deadline dates.
Accountant – Analytical and Tax Compliance
- Oversee GST and PAYE returns for tax planning
- Preparation of EOY financial statements
- Advice on creating and maintaining appropriate tax structures
- Direct IRD tax transactions through IRD portal
Cashflow Management
Bookkeeper – Transactional
- Processing Bills into Xero and bank batch payments for timely payment
- Reminders for payment due dates
- Administer Xero Analytics to assist cash flow planning
- Supplier Statement reconciliation
- Creating and sending invoices including repeating invoices
- Prompt Reconciliation in Xero for timely reporting
- Sending out Statements
- Accounts level Credit Control
Accountant – Analytical /Strategic
- Cash flow strategy and planning
- Financial, Entity and Tax structuring
- Advisory on Terms of Trade, supplier agreements and credit control policy.
Communications
Bookkeeper – Transactional
- Monitoring and clearing an accounts email
- Dealing with supplier and customer accounts enquiries
- Liaison with accountant
Accountant – Analytical
- Liaison with IRD through designated partner contacts
- Strategic Business Planning with regular check ins
- Tax Advisory
Bearing in mind the potentially significant crossover between Bookkeeper and Accountant services and whether service providers are calling themselves bookkeepers or accountants its worth considering the type of bookkeeping service that suits your business.
Some NZ bookkeepers are also Tax Agents which means they have a direct relationship with IRD and also may have authority to move funds between your various IRD accounts (e.g. GST / Provisional Tax / PAYE etc)
Some NZ bookkeepers also provide services for finalising and filing End of Year Financial Statements which can sometimes be an economical choice for a smaller business. There are of course exceptions but a bookkeeping preparing End of Year Financial Statements is still likely to be transactional oriented. There means less emphasis on an overview and strategic considerations.
Where there is any kind of complexity such as multiple entities / shareholdings / financing / trusts etc then a Chartered Accountant can add real value. A Chartered Accountant is trained in understanding the bigger picture and can be proactive in arranging structures as well as ensuring potentially very expensive mistakes are prevented. This is not just for Tax Rules but also shareholder agreements, financing and other potential areas of risk. We have seen examples where a transaction oriented bookkeeper or accountant’s failure to understand the wider picture has resulted in preventable losses of hundreds of thousands of dollars.
What is the bookkeeper’s Speciality?
What is the bookkeepers speciality and will it suit your business needs, some points to consider:
- Are they a Virtual Assistant offering a range of services including bookkeeping. This can suit where there is a wider range of admin tasks required with perhaps only basic bookkeeping needed.
- Are they an Accountant who also carries out bookkeeping tasks themselves. This can work for small businesses where it makes sense for the bookkeeper to also be able to complete EOY and Tax compliance.
- Do they have expertise in specific software such as Xero and able to support implementing and maintaining best practice for day to day operations.
- Do they offer remedial bookkeeping to resolve historic issues
- Can the bookkeeper offer specialist knowledge of apps related to Xero for Job Management / CRM / Inventory or other specific applications.
How to know if the bookkeeper is GOOD?
Anyone can call themselves a bookkeeper and there is no requirement for a qualification and a very wide range of skills in the industry.
From personal experience over the last 9 years, I have experienced it is quite possible for a bookkeeper to have been in business a very long time, have a CV with an extensive list of experience with various organisations, and still be what I can only classify as incompetent, inefficient or unreliable. Some of the errors we have seen include:
- Changing the system of coding and processing without consultation with the client or in defiance of accountant’s directives.
- Gross inefficiency in using old style processes
- Being unacceptably slow to complete tasks
- Missing deadlines such as GST and PAYE filing.
If the bookkeeper has not been personally recommended to you, and arguably even if they have, then ask for references and talk to those references. Check the type of work the bookkeeper has been doing, for how long, and how the referee knows they do a good job (or not).
Check online and Google Reviews.
Will the bookkeeper understand your business?
Do they have direct experience in your business sector and with a business of your size and scope.
Check if you will be working with a dedicated bookkeeper, or if the work will be carried out in an environment where the work is shared. Would you benefit by being able to build up a relationship with the bookkeeper over time so they really get to understand your business. For many businesses, this relationship is very important as the bookkeeper becomes a member of your team contributing and working with other employees.
Accountant Focus v Business Focus
A related aspect is whether the bookkeeper is part of an accountancy firm or not. Although it can be a good choice to have your accountant also do your bookkeeping there are considerations to be aware of.
Cost – sometimes the fees accountants charge for bookkeeping are significantly higher than independent bookkeeping rates.
When your accountant is doing your bookkeeping this can mean tasks are carried out from an accountant’s perspective and less focus on day to day operations within your business. A specialist bookkeeper is more likely to have an focus in ensuring day to day processes within the business are efficient and the full value is being extracted from Xero for your benefit in your business.
Sometimes accountants are put in the position where their clients want them to do everything including areas they would rather not as they don’t carry the expertise. Payroll is an example of this.
Supervision and Support
When the bookkeeper is part of a reputable brand and working within a supervised team then you will have access to a supervisor who is not your bookkeeper. Many businesses value this 2 tier approach as it provides a separate channel to discuss issues that may not be appropriate to take directly to your bookkeeper.
What guarantees does the bookkeeper offer? If you are engaging with a reputable bookkeeping brand they will take responsibility for the quality and accuracy of work. This includes protection from paying fines for late filing or large bills from your accountant for having to check and re-code data.
Qualifications / Insurance
Qualifications are a useful indicator. What is the Qualification, how long have they had it, and what is required to get it. Are they a member of a professional organisation that has professional development requirements such as the ICNZB.
Do confirm the bookkeeper carries Professional Indemnity and can provide professionally prepared Terms of Trade and a Privacy Policy. This will enable them to carry Cyber Insurance and also support appropriate confidentiality with staff and contractors.
Other bookkeeper considerations
There are many considerations in understanding if a bookkeeper is going to suit your business. Here are some more:
Is the bookkeeper a sole trader or part of a team?
Many bookkeepers work alone from home, whereas a team environment can provide some significant advantages. The two that come up most often in feedback from clients are:
Experience and expertise
- In a team, as well as online support environments such as facebook forums, a bookkeeper has their team members and potentially a supervisor for support. This helps with consistency and also provides an opportunity to develop a healthy work culture with shared values.
- Individual team members may have specific expertise in areas such as payroll and 3rd party Xero Apps Specialist knowledge is needed for success in dealing with high volume and international e-commerce transactions and the payment portals and account types associated with that. A team is more likely to have someone onboard with this experience.
Backup
- A team can backup your bookkeeper through absences due to sickness or holidays.
- Supervisor backup may be part of the team environment and this can be a valuable . 2nd tier of service for conversations not appropriate to have with your bookkeeper directly.
Pricing
There are generally two types of fees with bookkeeping, Fixed Price or Charge-Up.
Fixed Price provides certainty of a regular cost and what that includes. Fixed Price can often be more expensive as the bookkeeper is needing to build in a degree of risk in case things don’t quite go as planned.
Charge-Up is where services are provided on an hourly basis, often with detailed timesheet reporting for high transparency and accountability. Charge-Up generally means higher costs when the relationship starts which then drop over time as efficiencies are put into place and the bookkeeper becomes familiar with your specific processes.
Here is the ICNZB bookkeeper rate survey from 2023 as a guide.
Is the bookkeeping service Remote or On-site?
The development of cloud accounting software has freed up administration tasks to be completed anytime and anywhere. Bookkeeping is easily separated as a stand alone task to be completed remotely.
On-site Bookkeeping
Onsite means someone is paying for the travel time/cost and office space and resources (computer station / chair etc). Time is limited to the site access hours. There is also the cost of downtime with an employee getting settled each day, taking breaks, getting distracted by goings on, and so on.
If the role is not just bookkeeping but also reception, co-ordination and other tasks then onsite could be the right solution. It’s common in this situation for the bookkeeping to be completed in the quieter times and this can work well where only basic bookkeeping is required. The risk is that a team member strong in communication, liaison and other frontline tasks often will not enjoy bookkeeping so it falls to the bottom of the priority list.
Remote Bookkeeping
Bringing on a new bookkeeper can be an excellent opportunity to review internal processes that may have been going on unchanged for a very long time. There are now very few valid reasons why anyone would need to be on-site to carry out bookkeeping tasks. A bookkeeper who uses technology to work efficiently can help you streamline and get ready for remote support. One of the most extreme examples Living Business has assisted with was a 20 hour a week onsite position being transformed into 2-3 hours a week of remote bookkeeping. It is not unusual for required hours to be drastically reduced when good systems are put in place.
Bookkeeping is generally easy to peel off as a stand alone item to be carried out off-site and there are good reasons for doing so:
- Confidentiality
- Access specialist bookkeeping skill set
- Independent oversight
- No overhead, and pay only for the time you need.
Is the bookkeeper based in NZ or overseas?
There is no end of services being offered by overseas accountants and bookkeepers to businesses in NZ. Even more so, as a bookkeeper Living Business is constantly being approached by overseas agencies looking to support with accounting and bookkeeping services. This is the same for accountants who are also constantly being approached.
You might not be aware if your accountant or bookkeeper is already using overseas contractors to complete your tasks. It is not necessarily a good or not so good thing, like everything it has its advantages and disadvantages. There are increasingly some really good operators out there who have strong links with NZ and strong supervision and support for the employees providing the services.
Living Business chooses not to engage overseas contractors.
The main and significant advantage of using overseas services is the often extraordinarily low hourly rates.
Other considerations
Are there any ethical considerations that might concern you such as who is carrying out the work, what support is offered, how much they are getting paid and what are their working conditions.
What experience do they have in the NZ environment. Sometimes this is not so much about language as about an understanding of our culture. If the work is purely transactional then it may not matter, but if you are looking for a bookkeeper who understands your business and can be proactive then it may be a significant risk to be working in a different culture.
Time Zone issues. How often and when do you need to be able to contact your bookkeeper. It could be an advantage to have work carried out after hours or it could be a potential liability if you can’t communicate with your bookkeeper in a suitable timeframe.
Is there an increased risk to confidentiality of your business information. When overseas contractors are accessing your information it may be more difficult to control the risk of potential breaches and sale of your information to third parties.
Contact Living Business to discuss your bookkeeping needs. We will help clarify what you need, whether or not Living Business is a good fit to work with you. No obligation. No pressure.