As a small business owner, you may not think that your accounting needs are very complicated. You may feel you have the necessary financial skills. Invoicing and expense management software and apps like Certify and Quickbooks certainly make the job easier.   

However, without additional support from an accountant or bookkeeper, you could be missing out on some key benefits. An extra pair of hands can save you time and allow you to focus on your main tasks of running the business. Expert help can save you from making costly mistakes when it comes to submitting accounts and paying tax too. It pays to consider specialist help.   

In this article, we will explain the difference between accountancy and bookkeeping and how these two professional disciplines can help a small business succeed and grow. 

What are the differences between small business accounting and bookkeeping?

Of course, the role of an accountant and a bookkeeper are two different things. A bookkeeper is responsible for financial administration. This includes recording and reporting financial transactions, preparing financial statements, maintaining records and ensuring compliance with laws and regulations. Bookkeepers will track invoices and purchase orders so you know how much money you have to spend. There are lots of automated software tools that can help you with these tasks, but often, you can’t beat hiring a professional.  

An accountant on the other hand will provide services such as reviewing your financial records or providing advice on how best to improve them, preparing annual accounts and tax returns and sharing more tactical advice.

What can a small business accountant do for you?

Accountants are qualified professionals that can help with several different things including:

  • Preparing tax returns
  • Preparing financial statements
  • Cash flow forecasting and budgeting advice
  • Tax advice 

For example, a qualified accountant should be able to review a business’s annual performance and let you know how much tax you are liable for. Get this wrong and the implications could be serious and costly. 

What can a small business bookkeeper do for you?

A bookkeeper is a person who does the day-to-day accounting for your small business. They make sure money coming in is recorded, expenses are paid, and all of your financial data is consistent and correct. Specific examples include;

  • Recording and categorising daily payments
  • Sending customer invoices and monitoring payments received
  • Preparing banking reconciliations 
  • Processing payroll 
  • Preparing documents for an accountant to review

For example, if you have a client who pays you £3,000 on April 1st, a bookkeeper will record this transaction as income when they receive it and may even be able to deposit it directly into your account. They can pay bills and put every receipt in its own folder so that anyone can review them. These organisational skills mean no digging through a pile of papers on top of anyone’s desk or email box.

The bookkeeper also keeps track of inventory levels throughout the year so that when tax season rolls around again next year, there won’t be any surprises about how much money was made and spent. 

Arnaud Westphal, Accountant and MNV mentor

The main roles of accountants and bookkeepers

We can summarise accountant and bookkeeper roles as follows:

  • Accountant: The role of an accountant is to provide a wide range of financial services to help you and your small business prosper. They will help you with tax planning, financial statements and forecasts, payroll, mergers, and acquisitions, and outsourcing your accounting needs to other firms or individuals.
  • Bookkeeper: A bookkeeper deals with the day-to-day running of your business accounts by recording transactions in the books (ledger) and preparing reports on a regular basis.

There are three main differences between an accountant and a bookkeeper:

  1. Qualifications – Accountants must have at least 5 years of post-qualification experience before they can register as such with their professional body (the Institute of Chartered Accountants in England & Wales). In contrast, anyone can become a self-employed bookkeeper after taking an exam set by the National Association of Accounting Technicians (NAAT). 
  1. Role – Accountants deal with much wider aspects than just keeping track of income/expenditure within a company, whereas bookkeepers tend only to look at these two areas as well as some administration tasks such as managing staff pay. 
  1. Working relationship – Depending on which addition works best for your business, you must take into consideration their different roles, responsibilities, time and fees. An accountant is unlikely to be needed full-time – perhaps even just once a year. A bookkeeper is likely to work much more regularly for you.  

Accountant vs Bookkeeper

If you want someone to help with your financial statements (i.e., profit & loss statements), tax compliance (e.g., preparing your tax returns), and other accounting tasks related to your business’ finances and taxes, then an accountant would be a good choice for you. 

However, if you want someone who will manage your cash flow and ensure that bills are paid on time and money comes in when expected, then a bookkeeper may be better suited for the position.

My New Venture is here to help clarify any questions and queries you may have on your business journey. If you’re still unsure about what kind of business support you need or where to start, learn more here.

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