One of the first questions that a start-up business asks us is to explain the role of the bookkeeper and the accountant in small business finances. Many people get confused about the role that each performs. And others think that they need an accountant when they actually need a book-keeper and vice versa. The terms seem to interchange a lot whenever I am speaking to new business owners.
In this article, I will explain the duties of a bookkeeper and an accountant, the main differences, and give some guidance on who you should be calling on to help you with your business finances.
One of the first questions that a start-up business asks us is to explain the role of the bookkeeper and the accountant in small business finances. Many people get confused about the role that each performs. And others think that they need an accountant when they actually need a book-keeper, and vice versa. The terms seem to interchange a lot whenever I am speaking to new business owners.
In this article I will explain the duties of a bookkeeper and an accountant, the main differences, and give some guidance on who you should be calling on to help you with your business finances.
What does a bookkeeper do?
A bookkeeper’s main role is to process the financial transactions of a business into a software system such as Xero or Freeagent, and help turn the wheels of the business by paying bills and chasing customers for payment. All businesses will generate a lot of paper, such as purchase invoices, receipts and expense claims. The bookkeeper will transform a bundle of paper into something orderly and accurate. Some bookkeepers will also prepare VAT returns, run payroll and prepare and file self assessment tax returns.
Most book-keepers operate as a stand alone service. In some ways it’s like having your own part-time finance person, but remember that they will need to take holidays and are often juggling their workload.
What does an accountant do?
An accountant’s main roles are to deal with higher level compliance such as filing accounts and tax returns, and to advise the business owner on the strategic management of their business. A good accountant will also conduct regular tax planning to minimise business and personal tax liabilities, and provide advice on cash flow management. They can act as a sounding board for your ideas and make introductions to a range of other trusted service providers.
Accounting firms have a range of team members who will provide different levels of service to the business. At One Accounting, our clients can expect to work with three or four dedicated members of our team over the year. An accounting firm can provide an all year round service and cover when team members are on holiday or involved with other clients.
So…..what’s the difference?
A book-keeper will work on your books weekly, fortnightly or monthly. The frequency depends on the size and complexity of your business, and also how up to date you need/want your financial records to be.
An accountant will generally work at less frequent intervals, for example to work on quarterly VAT returns or annual accounts. They could be involved on more specialist projects at certain times, for example to work on a business plan or cash flow forecast.
What does a Bookkeeper do? What does an accountant do?
Here’s a split of the duties that each will typically do. Note that some tasks can be performed by both the bookkeeper and the accountant.
Qualifications and Experience
A bookkeeper doesn’t need to be qualified, but many will be follow studies with the Institute of Certified Bookkeepers (ICB), International Association of Bookkeepers (IAB) or Association of Tax Technicians (ATT). Many have experience of working in banks or in a financial role in a larger firm, before becoming self employed.
Accountants in Practice study for one of the main four UK Chartered Accountancy Institutes.
- Chartered Institute of Management Accountants (CIMA)
- Institute of Chartered Accountants In Scotland (ICAS)
- Association of Chartered Certified Accountants (ACCA)
- Institute of Chartered Accountants in England and Wales (ICAEW)
One Accounting are a firm of Chartered Management Accountants, and we also have ICAS and ACCA qualified accountants in our team. We also have part qualified CIMA, ACCA and ATT team members.
Did you know that the word ‘Accountant’ is not regulated, and anyone can set up an accountancy practice regardless of their qualifications, skills and insurance cover?
We think it’s essential that you work with a Qualified Accountant, so don’t be afraid to ask to check someone’s credentials!
What Tax Experience Does a Bookkeeper and an Accountant have?
A bookkeeper may have a range of basic tax skills, or none at all. You should always ask! A qualified bookkeeper will be able to prepare accounts and tax returns for sole traders, as well as basic self assessment returns. Most will also be able to prepare your VAT returns and deal with PAYE.
Accountants take exams at a higher level prior to qualifying. As well as PAYE, VAT and self assessment, they will have detailed knowledge of corporation tax, capital gains tax, and inheritance tax. If you have a particularly complex tax question, or perhaps need some ad vice on international tax, it is always best to ask.
Which is cheaper – a Bookkeeper or an Accountant?
A bookkeeper will typically charge between £18 and £25 per hour for their services, which may be carried out on your business premises or at their home/office. Remember that they are paid by the hour, so spending time on sorting your receipts and invoices into date or alphabetical order prior to handing them over will save you money.
At One Accounting, we bundle our services into a fixed monthly fee, rather than charge by the hour. This could include your annual accounts, tax returns, management accounts and payroll. We also include tax advice and email support. Prices can range from £125 per month to £1,000 per month, depending on the size of your business and what we do for you.
How we can help…
Do some accounting firms also provide a bookkeeping service?
Yes, they do. Some larger firms will have a dedicated bookkeeping department. Other firms may have team members who provide bookkeeping services as well as payroll and tax returns. In many cases it helps to have the accounting firm perform the bookkeeping to ensure you just have one point of contact, and also that ‘the left hand tells the right hand what it is doing’.
In A Nutshell
- If you are a sole trader and your business is not VAT registered, a bookkeeper will be the most cost effective service for you. They will also provide some good, basic tax advice.
- If you run a limited company, get an accountant to prepare your annual accounts and corporation tax returns. We also recommend that the accountant takes care of the VAT and PAYE to ensure that all of the main taxes are dealt with by the same firm.
- If your business starts off small, and then grows, you can easily work with a bookkeeper and then involve an accountant at a later date
Please contact us if you want to discuss how a bookkeeper and an accountant can help you (and which is right for your business!). We work with a number of good bookkeepers and also provide our own internal bookkeeping service.