What do I need – a bookkeeper or an accountant? What is the difference anyway?

I often get asked “What is the difference between a bookkeeper and an accountant?”. It can be confusing for clients if they think they need an accountant when they actually need a bookkeeper, or vice versa, so it helps to understand the tasks that each role performs.

As a bookkeeper myself, I can explain the difference between the two, and help business owners understand who they should be calling on to help them with their business finances. In essence a bookkeeper works on a business’ day-to-day financial data and keeps it organised, whereas an accountant uses the bookkeeper’s information to work to a high level of legal compliance, including things like tax returns.

Day-to-day, what does a bookkeeper do?

The paperwork generated by a business is not insignificant and ranges from purchase orders, invoices, receipts and expense claims. Generally, a bookkeeper is focused on transforming the paperwork of the financial transactions of a business, into something more orderly and accurate, maintaining them in a software system such as Xero or QuickBooks. Some bookkeepers support the business by paying bills and chasing invoices for payment; others will offer an additional level of service where they prepare VAT returns, run payroll, prepare and file self-assessment tax returns.

Most bookkeepers are run as small stand-alone businesses and clients outsource the work to them rather than hiring an employee to do the work.

What an accountant does that is different within their role?

Accountants can be a key part of a businesses team, not only do they ensure that the business complies with its legal financial responsibilities, such as filing accounts and tax returns, but they can be of strategic importance too. They can provide the financial information useful for business decision making and act as a sounding board for your ideas or future planning. Where necessary, accountants can help support building relationships with other service providers and investors.

In essence, there are some things that both a bookkeeper and an accountant can do, including:

  • Providing basic tax advice
  • Maintaining the accounting software with business transactions
  • Prepare VAT returns
  • Prepare self-assessments
  • Handle sole trader accounts
  • Run payroll

So, what are the differences?

A bookkeeper does not need to be qualified but will have worked in a financial environment and followed some sort of study programme. Whereas an accountant will have had to complete qualifications with one of the UK Chartered Accountancy Institutes.

Bookkeepers usually will work on your books weekly, fortnightly or monthly, depending on your business needs, but an accountant will generally work at less frequent intervals, perhaps quarterly to produce VAT returns or yearly to create annual accounts.

Qualified bookkeepers will have a knowledge of tax requirements to ensure they can support on self-assessment, VAT returns and PAYE; however, an accountant will have qualified to a higher level and have a greater understanding of more complex tax issues, like corporation regulations and personal taxes.

To discuss further what challenges you face and what we can do for your business with bookkeeping services or accountancy software set-up, why not have a complimentary 30-minute discovery call.

   

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