We all know that bookkeepers and accountants are a necessary business function, but do we really understand who does what and why, and what the difference is? Why do we need one and not the other or do we need both?
Broadly speaking bookkeepers are primarily concerned with accurately recording your financial data, while accounting involves interpreting and reporting and summarizing that data.
Let’s go into it in a bit more detail and define the roles of each.
What do bookkeepers do?
Primarily the role of the bookkeeper in your business is to record financial transactions using an accounts package like Xero or Sage.
They will process all your purchase invoices, matching to dispatch notes or delivery notes, and reconcile supplier statements. Then some make payments to suppliers too. They will also raise sales invoices, chase payments and send customer statements out. Some bookkeepers process all your bank transactions onto an accounts system and reconcile your bank account. Bookkeepers will also prepare VAT returns, run payroll, process CIS payments and file self-assessment returns. They reconcile accounts up to trial balance level and can rarely prepare management accounts.
They also turn a pile of messy papers into something order and accurate. They work on a daily, weekly or monthly basis as required for your size of business. A good bookkeeper is a valuable asset to a business and should not be seen as an unnecessary cost.
What qualifications do bookkeepers have?
Ideally you should be hiring a qualified bookkeeper. They be accredited with the Institute of Certified Bookkeepers (ICB), the International Association of Bookkeepers (IAB) or the Association of Accounts Technicians (AAT Bookkeeper). All qualified bookkeepers have a practice licence and are regulated by all AML legislation and compliance. Always check with your bookkeeper that they are practicing under a licence.
What do Accountants do?
An accountant mainly deals with higher level compliance things such as filing accounts and annual returns at company’s house, and corporation tax computations. A good accountant should be advising you on the strategic planning of your business to minimise business and tax liabilities and to help with cash flow.
Surprisingly anyone can call themselves an accountant. However, the title “chartered accountant” indicates that the person has undertaken in-depth training, passed a series of rigorous examinations in financially management, auditing, business strategy and taxation, and committed to continuing professional development CPD to keep their skills up to date.
A chartered accountant is the only type of accountant that can audit your accounts. You only need a chartered accountant if you require audited accounts. Lots of companies have their accounts audited, but in reality, you only have to have them audited if your turnover is over £5.6 million.
AAT Qualified Accountant
Bridging the gap between a bookkeeper and a Certified accountant is an AAT qualified Accountant (MAAT). The AAT Diploma in Accounting is a 3-year semi-professional qualification and AAT qualified accountants can usually do as much as your accountant can do. However, only a Chartered accountant can audit accounts.
This handy table shows what tasks each can do for you.
|Qualified Bookkeeper||AAT Accountant||Chartered Accountant|
|Process Purchase Invoices||√||√|
|Process Expense Claims||√||√|
|Raise Sales Invoices||√||√|
|File and keep records||√||√|
|Chase clients for payment||√||√|
|Reconcile the bank||√||√|
|Post Journal entries||√||√|
|Prepare and File VAT returns||√||√||√|
|Prepare Management Reports||√||√|
|Prepare Financial Reports||√||√|
|Prepare Business Plans and cashflow forecasts||√||√|
|Prepare Final Accounts||√||√|
|Provide basic tax advice||√||√|
|Advise of business structure||√||√|
|Prepare complex self-assessment returns||√||√|
|Prepare Corporation tax returns||√|
|Calculate capital gains tax||√|
What qualifications do Accountants have?
Accountants in practice usually chartered or certified accountants. They are usually a Chartered Certified Accountant (ACCA), Associate Chartered Accountant (ACA), or an (ICAEW) from the Institute of Chartered Accountants. Accountants in business are usually Chartered Institute of Management Accountants (CIMA). An accountant may also become a Chartered Tax Advisor (CTA).
In summary, when running a business, you probably will want both a bookkeeper and an accountant. Or if you are a small business, an AAT qualified accountant is probably enough.
So, hopefully that has cleared up a few Myths for you. For more information please do not hesitate to contact me.