Bookkeeping and accounting – What are the differences?
Bookkeeping and accounting occupy the same financial ecosystem and their responsibilities often overlap.
However, the outcomes for businesses from each service can differ significantly.
Bookkeeping – A practice as old as time
The practice of bookkeeping originated over seven thousand years ago in Mesopotamia and it remains no less important now than it did then.
Bookkeepers keep an accurate record of money coming in and out of a business, paying close attention to exactly what is happening with your finances.
They essentially transform a business's receipts, bills and invoices into a digestible log of money flowing in and money going out.
Primary duties of bookkeepers range from running payroll, paying bills and creating invoices to even filing tax returns.
The accountant – A master of all trades
Less concerned with the day-to-day financial activity of your business, accountants provide a highly expert and versatile service for your most complex financial tasks.
They are highly trained in many areas and are typically less frequently involved in a business's operations.
Instead, accountants use information provided by bookkeepers to complete tasks including auditing, generating financial statements, forecasting, tax optimisation and regulatory compliance.
While occasionally mimicking bookkeepers' work, the craft of accountancy focuses more on the financial bigger picture of a business.
So, do I need a bookkeeper or an accountant?
The services provided by bookkeepers and accountants are each incredibly valuable to business owners.
Without them, it is easy to find yourself drowning in paperwork and spending a lot of time just trying to stay afloat.
To help you decide whether your business should be calling a bookkeeper, an accountant, or both, here are a few scenarios.
Getting your finances in order
If your business is struggling to stay on top of day-to-day finances, it is often a good idea to contact a bookkeeper to help keep on top of paperwork.
Even if your finances are in order but you find yourself spending a lot of time keeping it this way, a bookkeeper could be a worthwhile investment.
Filing an annual tax return
Approaching the time to submit an annual tax return can be stressful, but an accountant can help you prepare, certify and file with HMRC.
Growth of a business
When a business is scaling fast, and you find yourself taking attention from areas such as sales and customer satisfaction, a bookkeeper can help free up precious time.
Likewise, an accountant could be useful for providing financial forecasts, strategies and help when a business is eligible for VAT registration.
Hiring a first employee
A landmark occasion for the growth of a business should not be hindered by contractual and payroll concerns.
Using an accountant to make sure you have the appropriate legal documents, or maybe administering PAYE and NI with a bookkeeper, can both be smart moves for businesses.
Who should I contact?
Whether your business is scaling fast or your finances simply feel a bit chaotic, exploring what a bookkeeper or accountant could do for you is a crucial decision for your business.
Seeking professional expertise can drastically save time, improve efficiency and help overcome regulatory requirements without the hassle.
