Whether you work in finance or are looking to hire someone to help with your business finances, understanding and the difference between an accountant and a bookkeeper is key to taking the right next step.
Accountant v Bookkeeper
In a nutshell, a bookkeeper is responsible for collating all the financial records of the business and preparing accounts up to trial balance stage. In some cases, depending on the role and individual, the nominal ledgers will be fully reconciled.
An accountant’s role is generally to take the trial balance, nominal ledger and records to prepare the statutory accounts and tax returns. The formal paperwork required will differ according to business structure in place. The accountant may have questions for the bookkeeper to help them understand certain transactions and help them make the best possible tax-saving adjustments for their mutual client.
For smaller businesses, such as a sole trader, there may be no requirement for a separate accountant and bookkeeper. In these cases, business owners may engage an accountant to handle all bookkeeping and tax returns on their behalf typically once a year.
Roles of an Accountant and a Bookkeeper
Working towards the same objectives from the accounting process, a bookkeeper usually organises finances by making sure that all day-to-day financial transactions are documented. They do this by recording all transactions in a general ledger. This information is then passed onto an accountant whose primary responsibility is to gather, analyse and summarise all financial data in order to evaluate the performance of a business.
While bookkeepers are actively involved in a business’ daily transactions through classifying financial information, an accountant will provide financial strategies, analysis and forecasting. Therefore, despite working to support financial management for a business or individual, their roles involve differing functions in the financial process.
Key Functions of a Bookkeeper:
- Record daily transactions such as sales, invoices and payments
- Processing payroll and other payments to employees
- Complete payments for suppliers and creditors
- Manage the general ledger and ledger accounts
- Maintain inventory and cash flow
- Create financial reports
Key Functions of an Accountant:
- Tax advice, planning and assessment, including preparing tax returns
- Analyse and review expenditures, accounts and budgets
- Organises payroll-related tasks
- Assess financial risks for business contracts
- Determine accounting disparities
- Prepare and review a range of financial statements and forecasts
- Conduct audits to ensure all financials are within compliance with tax rules
Who should you hire for your business?
Essentially, you might need to hire an accountant and a bookkeeper for your business: the first to overlook daily transactions, and the second for making financial decisions on behalf of a business. The decision, however, will depend on various factors. For example:
- The size of the business and staff
- The type of business and the services they offer
- If you need financial support
For most small businesses, in general it’s helpful to hire a part-time bookkeeper for the management of financial transactions, while an accountant is employed for specific needs such as filing a tax return or undertaking an audit. In contrast, larger companies will need to have a team of both accountants and bookkeepers.
Can I be a Self-Employed Bookkeeper?
In short, yes! If you’re good with numbers and managing figures, then setting up as a self-employed bookkeeper could be the ideal occupation. One of the major differences between an accountant and a bookkeeper is that an accountant needs to have certifications, for example, a financial accounting degree or an ACCA qualification. In contrast, a bookkeeper may have experience and/or qualifications, but they don’t necessarily have to be in accounting. Plus, it’s relatively easy to offer bookkeeping services virtually which makes working from home very convenient.
When you are a self-employed bookkeeper, it is necessary to understand where your responsibilities end. So, if you are planning to start a UK bookkeeping business from home, you should fully expect that you may have to work with year-end accountants on behalf of your clients.
Whether you hire either an accountant, a bookkeeper, or both, keeping your finances in order is crucial to business success.