A very common question the Smarties team is often asked is what’s the role of the bookkeeper and the accountant in business finances? Many people get confused about the role that each performs. And others think that they need an accountant when what they need is a bookkeeper, and vice versa. This blog will hopefully clarify the difference for you.
What does a bookkeeper do?
A bookkeeper’s main role is to process the financial transactions of a business into an accounting software system such as Xero, Quickbooks or Sage. All businesses will generate a lot of paper, such as purchase invoices, receipts and expense claims and the bookkeeper will transform a bundle of paper into something orderly and accurate.
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 an 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
Some bookkeepers will also prepare VAT returns, prepare and file self-assessment tax returns and complete monthly management accounts.
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?
An accountant’s main roles are to deal with higher level compliance such as filing accounts 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 as they have an in-depth understanding of the taxation system and requirements. Changes in tax rules that can make understanding tax difficult and it’s often a major concern of business, especially as your company grows and your tax liability increases.
Advisory and analytical in nature, the professional services provided by an accountant may also include:
- 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.
A bookkeeper will work on your books weekly, fortnightly or monthly. The frequency depends on the size and complexity of your business as well as how up-to-date you need/want your financial records to be.
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. 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.
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.
Here at Smarties Bookkeeping we offer bespoke bookkeeping incorporating the following services:
- Full bookkeeping services
- VAT returns
- Budget planning
- Payroll services
- Self-assessment tax returns
- Forecasting variance analysis and cash flow
- Monthly/quarterly management accounting
You can contact us via email: email@example.com you can call us on 0117 9000 895 (Bristol office) / 01823 729 254 (Taunton office) for an informal chat about how we can help you and your business.