On the surface, it might seem like accountants and bookkeepers have the same job. After all they both deal with the finances of a business, right? While technically yes, there are some key differences that separate the two professions, and mean that you might end up asking the wrong person for the wrong thing. And there’s nothing worse than signing up to a service, only to realise that they don’t offer a key thing you need! So your first step is to look at each and decide which you need, which starts with understanding the difference between them. That’s our focus today.
What’s Bookkeeping?
Bookkeeping is the name for the activity of keeping financial records for a business. It’s a fairly broad role, and usually involves storing and recording any and all financial transactions, from bank reconciliation, invoices and receipts, preparing VAT returns, running payroll or putting together cash flow forecasts. For an outsourced bookkeeper, it also means having frequent meetings or conversations with the business owner (or appropriate person) to make sure everything is up to date.
So What’s Accounting?
Accounting is the process of an accountant bringing together a business’s financial information, usually in 1-year chunks, and then reporting back to them about their financial position and cash flow. They are also responsible for compiling and filing company tax returns, making sure that the business is compliant with any financial regulations, and even running audits. The responsibilities of an accountant will vary slightly from business to business, but they always revolve around these core tasks. Some accounting firms will offer add-on services, like forensic accounting, payroll management, bookkeeping or cost accounting. The information an accountant can provide is incredibly valuable, and can be used to help businesses figure out how to manage their finances more efficiently, and what next steps to take.
And the Difference is..?
As you can see, there is some overlap. But not all accountants are bookkeepers, and not all bookkeepers are accountants. They’re roles that need different skill sets and different ways of looking at information, so they tend to appeal to different people. Although there is some overlap, with some bookkeepers providing accountancy services like end of year accounts.
Mainly, bookkeeping involves managing the way that your financial data is gathered and stored. It’s more of an administrative role, though your bookkeeper will be a wealth of knowledge on your spending habits, compliance and how you could be more efficient. On the other side, accounting is all about interpreting financial information to inform your business decisions. Accountants are often past-focused – filing your year end accounts up to 9 months after your business year end, so they can give you excellent advice on what you did last year. A bookkeeper however is looking at your current figures, giving you advice on what to do right now.
Bookkeeping can be part of an accountant’s role, while accounting is very rarely part of a bookkeeper’s job. And many accountants would hire a bookkeeper to take part of these anyway, and vice versa.
So Do I Need Both?
Short answer? It depends.
Both are hired to help business with their finances, but in different ways. It can be incredibly difficult for even a small business to stay on top of their invoices and receipts (believe me, I know!), so having someone who is trained and experienced in finance can make things a thousand times easier. It’s safe to say that most businesses would benefit from a bookkeeper at the very least. But you don’t always need an accountant, unless you’re a limited company needing help submitting accounts, or you’re doing some serious trading. It’s all about what your individual business needs.
For example, say you’re a small business owner – which you probably are! You largely run your business from home, and you only have one or two employees who do the same. You understand the basics of your accounting software, and aren’t worried about filling in forms. In this example, you’d benefit most from a bookkeeper. Someone to make sure all of your data is there, in the right place and the right way to make it easy for you to fill in your tax return. They can inform you of your profit and loss at regular intervals, and generally take care of the everyday tasks that need to be done in the background. Someone you can hand a pile of invoices and receipts to, and they’ll magic it all into your accounting software.
Say now that you grew a little bigger. You got a premises, hired some new employees, and opened up an e-commerce store that sold your products online, all over the world. Now, you also need someone who can provide you with a detailed analysis on your finances and advice on the performance on your business, and where to go next. Someone to give you tax advice, make sure you’re compliant with all the right regulations, as well as create and file your personal and corporation tax returns. Now, you need an accountant.
Of course, there are dozens of little nuances that separate an accountant from a bookkeeper, but if I went into that we’d be here all day! Hopefully, this blog has given you a basic idea of what each type of business does, so that you can find the right support for you.
At Bluebell Bookkeeping and Admin, I provide proactive and efficient bookkeeping services to businesses of all shapes and sizes, from basic set-up support through to monthly reports and management. I have packages to suit every budget, and my job is to make sure your books run smoothly. If you’d like to know more, just get in touch with me today.