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For many of us who are self-employed running a business, we know how vital it is to look after the financial side of things. Yet for the majority, it is this aspect of running a business that seems the most intimidating. We wonder do I need a bookkeeper or an accountant, or both?

(This article was first published on LinkedIn)


What is the difference between bookkeeper and accountant?

If you use the medical profession as a metaphor, an accountant is the equivalent of the consultant and the bookkeeper is the nurse. The consultant is more highly qualified in a wider range of areas and involved with higher order decisions about the patient’s health. The bookkeeper is more like a nurse, administering the daily tasks, sorting out medication, changing dressings, and cleaning up.

The accountant can do the full gambit of tasks involved in running the finances of a business. This includes bookkeeping and also general accounting, taxation issues, annual returns, corporation tax returns. More importantly perhaps, the accountant is trained to use financial data to assess the health of your business and help you to make sound commercial decisions.

The bookkeeper can help you manage your financial books and take you up to trial balance stage in your accounts. Bookkeepers’ tasks might include inputting sales receipts and invoices, bank reconciliation, generation of sales invoices, and submitting VAT returns.

So, an accountant can also be a bookkeeper (or offer bookkeeping services) but an entry-level bookkeeper is not an accountant.


How to decide if you need a bookkeeper or an accountant

In deciding whether you need a bookkeeper or an accountant, remember a bookkeeper can only take you so far. You need an accountant to do the rest. This decision will partly rest on the type of business you are running.


If you are running a limited company

To be sure, a limited company needs both a bookkeeper and an accountant. The bookkeeper would undertake regular weekly or monthly activities to keep your finances up to date and free up your time to run the business. His or her qualities, qualifications and experience will ensure you minimise financial errors, and provide accurate financial reports. The bookkeeper may also submit your tax returns and reports.


Valued advisor

The accountant will then do your year-end overview making any adjustments to the trial balance and generating the income statement, balance sheet and statement of cash flows. He or she will make sure all is correct before it goes off to HM Revenue & Customs (HMRC).  Either your accountant or your bookkeeper may prepare your tax returns. But it is the accountant who will help you with important decision making. In fact, an accountant is a trusted advisor when it comes to many types of business matters.

For a limited company, often the best option is to employ a separate bookkeeper and accountant. For the daily bookkeeping tasks a bookkeeper will be more cost effective. Their training is not so rigorous so their daily rates are usually less than that of an accountant. Most accountants will charge the same rate for bookkeeping. Then you can pay your accountant to do the year-end tasks.


For small businesses

For very small or micro businesses, the question of whether you need a bookkeeper or an accountant is a bit different. It may be that a bookkeeper can do what you need, certainly to begin with. Most new start ups may talk to an accountant early on but not employ one until they get a little larger. So, whilst you would need a bookkeeper but not necessarily need an accountant from day one, you would need to employ an accountant further down the line.


How to choose

Bookkeepers and accountants work in tandem to cater for your business’s financial requirements. But they are different beasts not least in terms of qualifications.

Whilst a bookkeeper may have a bookkeeping qualification, they will not necessarily have an accounting qualification or even a degree.


Look for the right qualifications

However, an accountant should be chartered or certified. Be wary of this because bookkeeping is not regulated. This means that your discretion is vital. There are many accountants who have not got the full qualification. For example, someone with a degree or diploma in accounting and business can do your VAT or tax returns but cannot sign off your accounts when securing a mortgage.

Whilst there are many bodies to train with, ACCA being one, you need to choose an accountant who has both the requisite professional accounting qualifications and is certified.

It goes without saying that one of the best routes to getting sorted will be to ask your trusted and established business friends for recommendations. When you find an accountant, you can then ask them to recommend local, independent bookkeepers. And remember, experience matters, even if it costs a little more. Someone with several solid years of experience is worth their weight.


When is the best time?

You need solid financial advice from the outset. No matter how small your business. So it is always best to seek advice from a qualified accountant or bookkeeper immediately. Even if you do your own accounting records at the outset, you need to make sure you set things up correctly. This will help you avoid costly problems at year end. Then, when your business is bigger, you can bring people in to help.


Don’t forget the people effect

Lastly, remember that even with the numbers game, personalities are important. Make sure you gel with whoever you choose. Your ability to work closely with these important advisors is crucial, and we can only do that effectively with people we like and trust.

Ask us for advice about whether you need a bookkeeper or an accountant. Or get in touch for a chat as you set up your business. Call us today on 01785 243276 or contact us.


More information

The main accounting qualifications in the UK are with ACA, ACCA and CIMA.