This is a question I’m often asked by business owners. Accountant and Bookkeeper are terms which are used interchangeably in accounting and tax guidance, for example “ask your accountant or bookkeeper for support”. So what’s the difference between them, and which do you need for your business?
Bookkeeping is financial record keeping. It refers to how you record the day to day transactions of your business, categorising your income and expenses so that you know how well your business is doing financially and so you have accurate records for tax reporting. There are many ways to ‘keep your books’, ranging from paper records or excel through to dedicated software such as Sage, Xero or Quickbooks. Like most tasks in your business bookkeeping can be outsourced. A bookkeeper can take on all of your day to day finance jobs including raising invoices, recording expenses, reconciling your bank accounts, checking debtors and preparing VAT returns.
Accountants look after the statutory reporting for you and your business and are there to provide advice on more complex areas of financial reporting and tax. One of the main jobs your accountant will do is prepare year end accounts and tax returns. They can also help with management reporting, payroll, VAT returns and provide advice on structuring your business, for example as a partnership or Limited Company. Accountants will be able to keep you aware of changes in legislation which may affect your business.
So which do you need for your business?
This depends mainly on the complexity of your business and on how comfortable you are with looking after your financial records and completing your tax reporting. Here are three scenarios which illustrate how you might use a bookkeeper or accountant or both:
Joe is a sole trader. He finds the day to day recording of his income and expenses very time consuming and he struggles to keep his accounting records up to date. He uses a bookkeeper to do his record keeping. His bookkeeper uses Quickbooks Online and Joe can also log in to see how his business is doing each month. He doesn’t use an accountant, instead he prepares and submits his annual self-assessment tax return himself from the records in Quickbooks.
Sally and Sarah trade together as a partnership. Neither of them like doing their bookkeeping, so they outsource this to a bookkeeper. They find preparing the partnership accounts and tax return too complex, so they use an accountant to prepare their annual partnership accounts, partnership tax return and personal tax returns.
Mike runs his business through a Limited Company. He uses Xero to record the company’s income and expenses himself, so doesn’t use a bookkeeper. He does use an accountant to look after the company annual accounts, corporation tax return and his personal tax return. His accountant also prepares his VAT returns and director’s payroll and provides ongoing advice for himself and the company.
Want to know more?
Contact me for more information.