Running a business can be challenging, and almost always involves heaps of paperwork to sort out.
You’ll need to make lots of important decisions on all sorts of things too, particularly when it comes to your finances. It can get a bit confusing, which is why lots of business owners decide to get some help with the money side of their business.
If you currently find yourself stuck on whether you’re going to hire an accountant, bookkeeper or both, that’s completely normal.
Let’s face it, to the average person defining the difference between a bookkeeper and an accountant is like naming the differences between a frog and a toad (apologies to any herpetologists reading this).
For most people they’re all too easy to mix up. But whilst bookkeepers and accountants do share common ground, their roles start and end at different parts of the journey.
It’s understandable if you’re unsure which route to go down, so we’ll look at what each entail, their main similarities and differences, and which one could be the best option for your business.
What does a bookkeeper do?
Think of bookkeeping like a diary or journal. It’s essentially a record of everything that takes place in your business. A bookkeeper’s job is to record your financial transactions accurately and consistently, and to make sure things like customer payments are up to date.
This can be done using paper records, but the use of bookkeeping software is increasingly popular, especially with Making Tax Digital on the horizon!
If you’ve never used bookkeeping software before, don’t panic! More and more people manage their own bookkeeping, so many software providers make an effort to make software which is as simple to use as possible.
If you still prefer to get someone else to take care of receipts and paperwork that’s piling up, a bookkeeper will help you take care of the clutter and turn it into something a little less overwhelming (and a lot more presentable).
It’s all about recording data while keeping the cogs of your business moving, and making sure everything is available in an orderly fashion ready for your accountant to review.
Your bookkeeper can also process payroll for you, and deal with other financial administration such as credit control or issuing refunds.
What does an accountant do?
An accountant’s main task is to ensure your business is fully compliant with its tax and reporting requirements, whilst saving you as much money as possible. Accountants are great for this.
Have you ever found yourself wanting to claim tax relief on your expenses, but choosing not to in case you don’t qualify? Doing it wrong can get you in trouble, so we don’t blame you for giving it a miss. But that’s why accountant’s are important.
Your accountant will make sure your business claims for every allowable expense, which in turn helps reduce your tax bill.
They can have a look at your finances and give you advice based on what your business can afford, and perhaps more importantly, what it can’t. An accountant will take the data in your bookkeeping, and use it to look at the bigger financial picture for you and your business.
What are the main differences between an accountant and bookkeeper?
Bookkeepers oversee financial transactions, produce invoices, follow up on late payments, and prepare essential financial reports such as balance sheets and income statements with the most up to date information.
Accountants review financial statements, analyse the health of your business, and help you make more tax-efficient business decisions.
|Bookkeeping Tasks||Accounting Tasks|
|Keep records (and categorise) daily payments and expenses||Prepare adjusting entries (these are journal entries made at the end of an accounting period that allocate your income and expenditure to the period they happened). For example, if you invoice a customer in August, and they pay you in September|
|Record payments and send invoices||Review costs and identify areas that need attention|
|Conduct monthly bank reconciliations||Offer business owners advice during decision making|
|Generate regular financial reports||Help the business be more efficient|
|Process and complete payroll||Help the business plan ahead and make financial forecasts|
|Have bookkeeping prepared ready for an accountant to review||File tax returns, make sure everything is fully tax compliant and give any advice or assistance|
How do I decide between a bookkeeper and an accountant?
It completely depends on your business, and what you need help with.
- If you’re unorganised with receipts and invoices, a bookkeeper will help you stay on track, ensuring you never miss an invoice.
- If you’re focused on growing your business and need assistance with completing tax returns and accounts, an accountant will be better suited for you.
Some accountants will offer a bookkeeping service, or even bookkeeping software which they can use to collaborate with you. This could be a much more cost-effective way to manage your finances.
Can I do my bookkeeping and tax returns myself?
Yes, you can! You’re completely free to manage your own bookkeeping, and of course you can complete your own tax returns.
Accurate accounting records are essential to a company’s sustainability, so we’d advise you to set up and use a robust bookkeeping system. It’ll be much easier to manage cashflow and meet your financial obligations if you.
Think of bookkeeping as the heart of your business, keeping cashflow pumping, and your finances in check. Every business can benefit from practising good bookkeeping habits.
Do I need both a bookkeeper and an accountant?
If you’re looking to reduce costs, then you might consider using bookkeeping software and giving your accountant access. If you do some research on software, you’ll find some come with free Live Chat support which can be useful if you need help to get going.
To make life easier (and save yourself a lot of time) good bookkeeping software includes features to help you automate lots of tasks so that they’re easier to manage, and there’s less chance of accidentally making mistakes. For instance, with recurring invoices, bank feeds, and simpler reconciliation.
If you want to grow your business, an accountant is brilliant for looking at the bigger picture and setting goals to help you succeed. If you’re not looking to expand and want to focus purely on managing your business and getting the finer details spot on, a bookkeeper may be more useful for you right now.
Lastly, don’t feel overwhelmed! It’s tough choosing which is right for you, so take your time.
Still undecided? Take Pandle for a spin and create a free account for all your bookkeeping needs. If you like us, you can give your accountant full access.