Today we wanted to address one of the most common misconceptions about the finance industry. Specifically, that accountants and bookkeepers are basically the same thing.
At first glance, it may seem that an accountant and a bookkeeper have very similar jobs, but there are some key differences that separate these two professions.
Both careers offer crucial functions for all types of businesses, from SMEs (small to medium enterprises) to large corporations. But, depending on the services that you need, you could be asking an accountant to do a bookkeeper’s job, or vice versa.
What Is Bookkeeping?
Bookkeeping is the activity of keeping financial records for a business. A bookkeeper’s duties usually involve storing and recording all financial transactions that a business makes. This means that they have frequent meetings or conversations with the business that they keep records for to ensure that their records stay up to date.
What Is Accounting?
Accounting is a process in which an accountant accumulates a business’ financial information and reports back to them about their financial position and their cash flow. The information that an accountant can provide is used to help the business figure out how to manage themselves in an efficient way, and to give them advice on possible investments or lending money to others.
What Is the Difference?
While both professions involve looking at and recording financial data, they are different. Bookkeeping involves the way that the data is gathered and stored; it is a more administrative role. Whereas accounting is the interpretation of financial information to inform business decisions.
Bookkeeping can be part of an accountant’s process while gathering financial information, but accounting is very rarely part of a bookkeeper’s duties.
Why Do Businesses Use Accountants and Bookkeepers?
Both professionals are employed by businesses big and small to assist them with their finances. It’s difficult for even a small business to stay on top of their invoices and receipts, and there are some things, like filing your end-of-year accounts or VAT returns, that are just too complicated for many businesses not to have support with. So having people who are trained in each area is going to make things a thousand times easier.
It’s safe to say that most businesses would benefit from a bookkeeper, at least, but not all would need an accountant unless they’re doing some serious trading. Both types of professionals have their own benefits to offer, but a business should think about the kind of financial assistance they require before they hire an accountant or a bookkeeper.
For example, a small business that largely runs out of your own home and has very few employees may only require a bookkeeper – someone who can make it easier for them when they need to fill in their tax return, and who can inform them of their profits and losses. Bookkeepers are great for everyday tasks and keeping things running smoothly. A good bookkeeper will also become a tradesperson’s best friend. They are used to being handed a pile of invoices and receipts, and they’ll understand how to record that information for you. They can also provide additional insight into your business, profitability, and general efficiency, running management reports so that you can run your business more effectively. You’ll never be more organised when working with a bookkeeper!
An accountant, however, is someone who deals with the larger-scale financial issues. They can provide you with detailed analysis and consultation on the financial performance of your business, as well as give you tax advice and support. Where bookkeeping is a factual look at the figures, accountants can take a more subjective look and help structure your business operations in a more efficient way. They are also the people who can compile and file your tax returns, VAT returns and deal with Companies House on your behalf.
Of course, there are dozens of little nuances that separate an accountant from a bookkeeper, but if we went into that we’d be here all day! Hopefully, this blog has given you a basic idea of what each type of business does, so that you can find the right support for you. Here at GB Bookkeeping, we provide proactive and efficient bookkeeping services to businesses of all shapes and sizes, from basic set-up support through to monthly reports and management. We have packages to suit every budget, and our job is to make sure your books run smoothly. If you’d like to know more, just get in touch with the team today.