Bookkeepers and accountants are the same thing, right? Wrong. This blog explains the important differences between the two.
It is a common misconception that a bookkeeper and accountant are one and the same thing.
It is true that they both work with businesses of all shapes and sizes to provide invaluable professional services. Their tasks may overlap, and both can be a critical aspect of managing the financial aspect of your business.
What does a bookkeeper do?
A bookkeeper will be the person who maintains the organisation and the smooth running of day-to-day financial situation.
Instrumental in the day-to-day running of your business, a bookkeeper can;
- Process invoices, receipts, payments and other financial transactions
- Provide credit control – in other words, they can keep on eye on clients who have paid and chase those that haven’t
- Process and maintain the business payroll system
- Prepare initial financial statements
- Reconcile accounts and prepare what is known as ‘reconciliation reports’
- Pay the invoices owed by the business
Bookkeepers are the people who keep the finances of the business up to date and in order. The information they maintain is the financial information that your accountant will use to provide more detailed financial advice and support for a business.
What does an accountant do?
The accountant is the professional who will use the information the bookkeeper pulls together and analyses it. From this, they will produce reports and use it to give you in-depth financial advice.
They also have an in-depth understanding of the taxation system and requirements. There are changes in tax rules that can make understanding tax difficult. Accountants will often specialise in certain aspects of financial expertise, one of which can be tax.
Tax is often a major concern of business, especially as you grow and your tax liability increases.
Advisory and analytical in nature, the professional services provided by an accountant may include;
- Tax advice and planning
- Other financial services such as raising funds, investment and so on
- Auditing is also something you may require from an accountant
- Corporate planning and compliance
- Pension advice and planning
- General financial management advice
This is not an exhaustive list with different businesses needing different accountancy services.
Does a business need a bookkeeper and an accountant?
It depends on your own personal preference, as well as the size and complexity of the financial status of your business.
Larger businesses tend to employ a bookkeeper either as a salaried employee or on a freelance basis to keep the financial status of their business up to date. A bookkeeper can make a huge difference in how well organised a business is.
The simple but important tasks such as getting invoices out on time, tracking payments and paying of bills are essential for maintaining the cash flow of a business, effectively its lifeblood.
An accountant can be the professional who ‘saves’ money on your tax bill, ensuring that you meet tax obligations and responsibilities, but that you also maintain a healthy profit.
They are the people who have a deeper, analytical understanding of the financial nature of your business and can be instrumental in understanding the value of your business and driving it forward.
Both a bookkeeper and an accountant have their place in any business, which is why so many businesses across the UK rely on one, either or both.
What about qualifications?
Essentially, a bookkeeper and an accountant will hold different qualifications.
A bookkeeper can hold a basic qualification which essentially ensures that they can keep the books in the order that is laid down in the business financial rulebook.
Higher levels of bookkeeping qualifications mean that they can competently perform more tasks, producing more complex reports and so on.
An accountancy course can work in a similar way with some accountants choosing to build their expertise with courses and professional practice. As well as generic accountancy qualifications, an accountant will often specialise too. A chartered accountant is one who has followed the academic path to becoming an accountant.
Do a bookkeeper and accountant work together?
Yes, because the services of both bookkeeper and accountant dovetail neatly within a business with the accountant relying on the information produced by the bookkeeper to provide their services. In return, the bookkeeper will rely on the accountant for providing guidance on what financial information needs to be collected.
Neither is mandatory for a business, but most business owners would agree, they would be in a much poorer position if it wasn’t for the bookkeeper and the accountant.