For businesses of any size, accounting and bookkeeping can services provide considerable and profitable advantages. They help to ensure that a business is compliant with HMRC, that they are maximising their finances, and can optimise a business’s growth. It is, however, often questioned what the difference is between the two functions, and which one is best suited to an organisation’s requirements.
We have put together this guide to help establish what the key differences are between accountants and bookkeepers, a summary of what services they offer, and some of their associated benefits.
Overall, ‘accounting’ relates to a corpus of financial knowledge, how it is interpreted, summarised and communicated through statements.
Accountants offer more complex compliance services which are of a more technical nature. They manage an array of services, such as filing tax returns, VAT enquiries, and annual accounts. They can also provide powerful strategic advice to business owners, including tax planning services, identifying relevant tax reliefs and exemptions, cash flow reviews, and a review of a business’s overall performance.
For start-ups, accountants can provide guidance on how to structure business operations, how to maximise profits, and support the consolidation of a business plan.
For established businesses, accountants can advise matters relating to an organisation’s growth, as well as the tax implications that come with acquiring large assets.
If your business requires more advice and input relating to financial decision making, technical advice, or if your business is expanding, this is where an accountant can help.
This is because accountants possess an in-depth knowledge of tax and legislation. Accountants analyse the financial data, assess whether profitability, and can provide the business owners with recommendations based on their findings.
Furthermore, an accountant’s input can be hugely valuable if you are considering hiring more employees, if you acquire assets and need advice, require assistance managing tax implications, and identifying and maximising savings. Accountants centre on a wider perspective, forecasting the future financial activity and health of an organisation.
In summary, bookkeeping entails the administration of finances, recording, measuring, and retrieving the day-to-day financial operations of a business.
Examples of bookkeeping services include data entry, booking expenses, recording invoices, and reconciling bank statements. Reports produced by bookkeepers can provide valuable financial information, ensuring they are all consolidated in an organised and digestible format.
Bookkeepers can greatly benefit a business with regards to the administrative side of finances. Their consolidation of finances can provide important financial information that can be used to organise and generate an understanding of company expenditures.
Moreover, due to their expertise, bookkeepers can process financial transactions more efficiently than business owners, meaning you can save time and energy in order to prioritise what’s important to your organisation.
Understanding the Contrast and the Relationship
Although both accountants and bookkeepers similarly involve financial data management, bookkeeping overall relates to how the data is gathered and stored, whereas accounting relates to the interpretation of this information, its wider implications, and extends over into financial forecasting.
Bookkeeping can thus be interpreted as part of accounting operations.
Despite a handful of overlaps, the majority of businesses can indeed benefit from using both accountants and bookkeepers to manage their finances. This is because they work in tandem to support a business’s financial stability and can be crucial for growth and success.
If the maintenance of day-to-day financial management and recording becomes a challenge, then hiring a bookkeeper may be of great benefit and suitability to you and your business.
Should you require more technical advice, if you own a larger business, or need help filing annual accounts, then an accountant is likely more suitable for you.
More often than not, organisations tend to utilise bookkeeping and accounting services at least once during the lifecycle of their business.
Could you benefit from a bookkeeper or an accountant? Get in touch with us for a free consultation and we can help identify your options.