Hands up if you thought bookkeeping and accounting were the same thing…
Don’t be embarrassed if you are waving your hand in the air right now, you certainly won’t be the only one. It is a common misconception and an understandable one, since the two professions do share some similarities.
However, as Clear Books explain below, there are differences — different skills, different services — and it is worth knowing what these are before you waste time and money in hiring the wrong person!
What does a bookkeeper do?
Great bookkeepers are fastidious, precise, and pay close attention to detail. These skills are essential, because they are responsible for recording the financial details of your business. They maintain your general ledger in which they note every financial transaction made in the course of running your business. The purchases, the sales, petty cash transactions, all need to be recorded in a bookkeeping spreadsheet or software.
Bookkeepers issue your invoices and ensure your suppliers are paid. They reconcile your accounts and deal with debits and credits, petty cash transactions and payroll.
If keeping track of your business transactions gives you a headache, or you find yourself neglecting to update your records on a regular basis, a bookkeeper’s services may well be what you need to keep things ticking over. Having someone else take care of these details will also free up some much-needed time so you can get on with other tasks.
However, if you are looking for more in-depth expertise, advice and support, it might be that an accountancy practice would be more suitable for your business needs.
What does an accountant do?
You often hear people refer to accountants as number crunchers, but they really step in once the numbers have been crunched.
Your accountant will take the information the bookkeeper (or the client) has provided and use it to prepare financial statements, reports and tax returns.
Using this information, they can offer you projections on profitability and cash flow and can provide advice on strategic tax planning and financial forecasting. Because of this ability to analyse your financial data, they are ideally placed to offer advice on business planning and growth too.
How do you know which one you need for your business?
Ask yourself: Are you thinking of expanding? Are you buying new premises or taking on an employee?
Perhaps you have a tax issue — you aren’t sure how much you should be saving to cover your tax bill or you are confused about what you can claim as an expense. Or, you just find the whole world of tax and self-assessment a total nightmare!
Are you seeking outside investment and need to make sure that your business plan is up to scratch? Perhaps you would like to reinvest in the business but you aren’t sure whether the time is right.
Maybe you are new to business and you would like general advice and reassurance that you have complied with all financial regulations and that you are heading along the right path.
If you can relate to any of these issues, it would probably be best to go with an accountant.
Offering advice of this nature is well within their area of expertise. Professional advice from an accountant on any of these matters could well save you money and save you making any costly mistakes as your business progresses.
If none of those statements rang true for you — if you don’t have any plans for expansion or growth and you’re perfectly comfortable come tax return time — it could be that hiring a bookkeeper is the best option for you just now.
You probably need a bookkeeper and an accountant if…
If business is progressing nicely and you have loads of transactions coming through, then you may well benefit from a bookkeeper’s services to help you keep on top of everything.
Of course, if that is the case, you’re probably also at the stage where you need an accountant too so, in this scenario, we would recommend that you employ the services of a bookkeeper and an accountant to ensure things continue to run smoothly.
You should also consider getting accounting software, Kashflow is one of many online accounting software that can transform your business accounting. More on accounting software here.
Editor’s Note:
Check out our accountancy directories below for more information –
Small Business Accountants
Limited Company Accountants
Contractor Accountants
Follow Company Bug