Accounting vs Financial Management: Why your accountant isn’t proactive

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Want someone on your team focused on future financial growth? You need a totally different type of accountant working for your business.

‘My accountant isn’t proactive!’ is a comment I hear all the time from small business owners. When I ask them to explain what they mean by ‘proactive’, they usually tell me they want an accountant who helps them look forward, not just backwards.

Small businesses owners want and need help to set financial goals, make financial decisions, manage their cash flow and improve profit margins.

But here’s the thing – it’s probably not your accountant’s job to help you with these things. Because while they might sound similar, and they both deal with money, accounting and financial management handle different ends of your business. 

In short, accounting is about the numbers and finance is about the story the numbers tell.

Let’s break that down a bit further.

In this article:

What is accounting?

Accounting is mostly focused on the past. It’s a field that typically involves balancing the books, legally structuring your business and reporting on what has happened. Think of it like “getting things in order” for your business.

Specifically, around 99 per cent of small business accountants are simply tax agents, and their technical expertise, role and revenue stream revolves around tax compliance. They file your tax returns, deal with regulatory bodies and keep you compliant.

These small business accountants have dedicated their entire career to specialising in this field of accounting. And since tax is calculated on your historical financial position, not on future growth, most tax accountants are always looking backwards.

The typical small business accountant is proactive – when it comes to tax structuring and compliance. And while this is obviously critical to running a business, it won’t help you get ahead. 

What is financial management?

Want someone on your team focused on future financial growth? Then you need a totally different type of accountant working for your business.

Medium and large businesses are usually engaged with more than one accountant when it comes to organising their finances, projecting growth and planning what’s next.

Yes, they still have that all-important accountant to manage their tax compliance, but they also hire other types of specialist accountants, such as financial accountants, financial managers, management accountants and CFOs, to focus on driving financial performance. 

Financial management is all about making sense of the numbers and using them to help make better decisions. It involves financial planning and analysis, providing insights on unit economics and even guidance on how to allocate capital. 

Financial management helps you make forward decisions, such as hiring your next employee or managing your cash flow. The work is more analytical in nature. Ultimately, the goal is for them to leverage these insights to improve profit, cash and the financial value of your business.

When people say things like ‘having a great accountant has been critical to business growth’, they are usually talking about a finance specialist.

Which one should I hire for my business?

While they are all technically trained accountants, there is a big difference between a tax accountant and a commercially minded financial manager or chief financial officer – and the reality is, you’re probably going to need both. 

To make the difference clear as day, this diagram breaks down the roles and responsibilities of a tax accountant and a financial manager or CFO.

It’s all starting to make sense now, right?

In large businesses and corporations, accounting and finance teams work together to provide financial information and insights to decision makers. However, it’s rare to find this combination of number crunchers in the small business space.

Where to find a financial manager

Why do we so rarely see strategic financial accountants in the small business space?

Firstly, they cost a lot. Many small businesses can’t justify the costs of a full-stack finance team with fixed annual salaries draining upwards of $300,000 from their business.

Secondly, it’s actually quite a narrow field of expertise. It takes a different approach of accounting to blend commercial and financial strategy and apply that to a fast-growing business.

Lucky for you, this is the whole reason why we started SBO Financial. Our goal was to be a different type of accounting firm that could provide the full stack of financial services – including CFO, management accounting and bookkeeping – for a fraction of the cost. 

We love reviewing the financials of existing and even prospective businesses because, like a good novel, we enjoy reading your financial stories. 

Yes, we are accountants, and yes, we can also do your tax. But ultimately, that’s just financial hygiene. The real focus is on how we can leverage this information to help you make better financial decisions.

So next time you’re wondering why your accountant isn’t proactive, just think about what job it is you’re looking for. Rather than replacing your tax accountant, it’s likely that you need a different type of accountant altogether to help manage your finances and bring you the insights you need to rocket your small business to the moon.

If you’re looking for that mystical ‘proactive accountant’ who’s focused on your growth goals, reach out to us for a chat

We’re here to help.

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