There used to be a huge gap between what a bookkeeper and an accountant can do. However, nowadays that gap has shrunk significantly. So let’s take a closer look to see what’s the difference between accountants and bookkeepers.
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The descriptions below are for a stereotypical bookkeeper and accountant. There will always be ones that can do more or less than others. So take these with a pinch of salt and speak to the individual to find out what they can actually do.
Accountants tend to take a more general overview of your financial information. They would look at the business as a whole and provide you with financial advice. They can assess what your business needs and help you make the right decisions. Accountants would also typically complete your self assessment tax returns or financial statements and corporation tax returns for a limited company. Accountants tend to be more hands off for the day-to-day because they are taking a higher level view of the business.
Typically, a bookkeeper would be more involved in the day-to-day financial data of your business. They will help you maintain accurate records by ensuring all your receipts are attached to your purchases. They’ll also make sure all your sales and invoice data is inputted correctly. Some bookkeepers are also able to complete self assessments or financial statements and corporation tax returns for limited companies. Bookkeepers don’t tend to give tax advice. Not because they’re not able to, but because a lot aren’t allowed to by their governing bodies.
You might need a bookkeeper, or you might need an accountant, or you might need both!
The first thing to do is to look at what you need help with. What will help your business the most? Are you struggling to keep on top of your financial transactions? Do you need help to improve your cash flow? Could you do with some tax advice? Is it the end of year tasks that are slowing you down? Take a close look to see what would make the biggest improvement to your business right now.
If you’re spending far too much time managing your day-to-day financial tasks, imagine what freeing up that time could achieve. What could you do with that time instead? Maybe you’ve found yourself a bit lost and need advice on the best way to manage your business finances. Would having someone to speak to help you out? There is no right or wrong answer here. Everyone has different needs for different stages of your business journey.
In my opinion, there are two main reasons to hire a bookkeeper:
The second reason is quite easy to spot in yourself. If you’re sacrificing making products or responding to customers to manage your finances, it’s time to get some bookkeeping support. Or if you’re just not doing it at all, then opt for a bookkeeper.
The first reason can be a bit harder because you don’t know what you don’t know! You might think you’re handling your bookkeeping tasks correctly. But a trained bookkeeper may take one look at your accounts and find loads of errors. Or worse, HMRC might challenge what you’ve submitted and slap some fines on you. So if you haven’t got some experience with accounting and bookkeeping already, then consider leaving it to the experts.
Whereas typically bookkeepers handle the day-to-day of your finances, accountants provide a higher-level overview. A qualified accountant will take a look at your financial records and offer some advice on the best way forward. It could be that you’re trying to decide whether to go limited or stay as a sole trader. Or you need to know the most tax-efficient way of purchasing a vehicle for your business. Perhaps you want to make sure you’re showing your fixed assets correctly in your financial reporting. Any one of these reasons is a good one to add an accountant to your business.
We’re out there, I promise! Whatever your experience with bookkeeping or accounting firms in the past, there are plenty of excellent ones out there. You just need to know what to look for to find the right one.
Whether you need a bookkeeper or accountant, there are some things to check to ensure you’re hiring a good one:
“Bookkeeper” and “accountant” are not protected terms. This means that anyone can call themselves a bookkeeper or accountant without qualifications or experience. So one way to find out if you’ve picked a good one is to see if they are qualified.
Quite often, an accountant will have a bachelor’s degree in accounting. However, you can also become an accountant through other routes such as with the Association of Accounting Technicians (AAT). Bookkeepers can also be qualified through places such as the Institute of Certified Bookkeepers (ICB).
But don’t rule out those without qualifications. There are some fantastic accountants and bookkeepers out there that have years of experience in lieu of any formal qualifications. My advice is to find someone who is either qualified or highly experienced or ideally both. Avoid those who aren’t qualified or don’t have experience.
Absolutely not! I often hear people saying “I use Xero, why should I use a bookkeeper, it does it all for me?”. And I cringe so badly. Software is a tool, and I mean that in both definitions of the word! It’s like saying “I have a spanner, why do I need a mechanic to work on my car?”. Or “I have a paintbrush, why would I pay an artist to paint a picture for me?”. Don’t get me wrong, the software is fantastic… if you know how to use it properly. And as the old saying goes, if you put in duff information, you’ll get duff information out (or words to that effect anyway!).
Software does not understand every nuance of your business. It doesn’t know what the 500 pieces of paper you’ve bought are for. It doesn’t know that only 50% of the cost of your phone bill is actually for the business. That £3000 you just spent? It doesn’t know that it’s for a fixed asset and you need its value depreciating. I could go on and on about things it doesn’t know! But it will make suggestions and have a good crack at what it thinks it might be. And often it gets it right. But a lot of the time it also gets it wrong! So if you find yourself thinking you don’t need an accountant or bookkeeper because you’ve got software, think again.
Ell Evan Bookkeeping are not Tax Advisors and so our advice and suggestions on the application of tax rules cannot be construed as tax advice.
