So you’ve entered the world of running your own business and need to find someone to help manage your finances. Do you need an accountant or a bookkeeper? What’s the difference between what they do and how much they cost?
The dictionary definitions shed some light on it. For bookkeeping you’ll find ‘the activity or occupation of keeping records of the financial affairs of a business’, whereas accounting is defined as ‘the skill or practice of maintaining and auditing accounts and preparing reports on the assets, liabilities, etc. of a business’. So the bookkeeper tracks your financial transactions – money in, money out, your closing balance – and an accountant pulls together reports such as your annual accounts, and files your tax returns based on this information. They can also interpret and analyse the data to understand and advise on the financial health of your business.
Because of this higher skillset (although a good bookkeeper will also prove invaluable to your business) accountants usually have an accounting or finance related degree and have attained professional qualifications such as ACCA (Association of Charterd Certified Accountants). They charge more than bookkeepers but offer more strategic advice.
When it comes to deciding which one you need for your business, the answer is you probably need both – you just need to be clear what each party is going to do and that they work well together.
Most small businesses start out doing elements of bookkeeping themselves, such as issuing and chasing invoices and recording expenses. The growth of accounting software such as Quickbooks has made these tasks quicker and easier to manage and many micro-businesses will find that it handles all of their bookkeeping needs.
Once your business is big enough and busy enough you should consider hiring a bookkeeper, even if it’s only for a few hours a week. At this stage you may wonder why you hadn’t called in an expert earlier. Whether it’s recording expenses correctly, chasing invoices more promptly or completing your VAT returns, a good bookkeeper will quickly prove their worth. Because bookkeepers are cheaper than accountants, look for one who is well qualified and can do as many of your financial tasks as possible.
The best practice advice for someone starting a business is to talk to an accountant right from the start to save you time and money in the long run. They can advise on how your business should be incorporated, whether you should be VAT registered, what expenses you can claim and get tax relief on and the most tax efficient way to pay yourself.
If your business is relatively small you may only need an accountant for certain jobs such as completing your tax return or compiling your statutory accounts. You can hire an accountant to do these specific jobs and because they won’t need to have an in-depth knowledge of your business you can shop around in terms of price.
More complex businesses will benefit from using their accountant as an outsourced FD, where you sit down with them every few months to discuss the state of your finances, your company’s performance and identify any opportunities or risks.
Checklist to get the most out of your bookkeeping and accounting team:
- Make sure you all use the same accounting software so you can access the same data and reports
- Make sure they both have experience in your type of business or industry
- Arrange regular meetings/calls between all three parties
- Be clear about what advice you want from your accountant and that your bookkeeper can provide the data to help with this.
To help you find the right expert for your business, the Quickbooks matchmaking service helps connect small businesses with qualified accountants and bookkeepers based on your location and the specific services you need.