Do I need an accountant or a bookkeeper?
Most new or small business owners are told that they should get some professional help with the financial side of their business – and they are often told this should be an ‘accountant’. Unfortunately that is a somewhat broad term and it can be confusing and complicated trying to figure out what you actually need. Plus, the chances are, anyone you speak to is going to tell you that you need whatever services they offer!
So do you need an accountant or a bookkeeper? What services do each offer?
The main difference
In a world of pen & paper, a businesses finances used to literally be run through ‘books’ or ‘ledgers’. You would have one for the bank, for your customers, your suppliers and one showing your profit or loss. Essentially, a bookkeeper is trained to maintain these. Obviously in the modern world this looks a bit different but you can pretty much think of a bookkeeper as someone who can maintain the transactions and documents that relate to the day to day running of your business.
An accountant will have more of an ‘external’ focus on your business. They are the people that will prepare and submit your annual accounts and tax returns to the relevant bodies (i.e. companies house or HMRC) as well as audit them if your company is big enough to need one. They will also have a strong focus on tax advice and some accountants will also offer more general business advice and planning.
Often a bookkeeper and an accountant will be a great combination for a business. The bookkeeper can provide the ‘boots on the ground’ day to day professional overview with an accountant managing the necessary statutory requirements. Having a bookkeeper can also mean a more streamlined process for your annual accounts as everything should be pretty much in order for your accountant, ultimately reducing fees.
What qualifications do they need?
Both the terms ‘bookkeeper’ and ‘accountant’ can actually be used by anyone, without the need for a qualification. So its really important to make sure whoever you are using has an appropriate qualification for the role they are undertaking.
A bookkeeper will tend to have a qualification with a body such as the IAB (International Association of Bookkeepers) or AAT (Association of Accounting Technicians).
An accountant will have a qualification with someone such as ACCA, ICAEW, ACA.
Its always worth asking what qualifications the person you are dealing with has and if you aren’t sure what they are, googling them will usually give you a good answer! It is also worth noting that both accountants and bookkeepers should be regulated by a professional body under Anti Money Laundering legislation. This can be with one of the bodies mentioned above or with HMRC. For example, at Aliter Finance we are regulated by the IAB.
So how do I know which one I need?
Well, it really depends on your business and your preferences. You don’t actually need to have either, until your business reaches a certain size, but that’s not necessarily a good idea. The larger and more complicated your business, the stronger the need for both a bookkeeper and an accountant.
However, in simple terms, if you want someone to manage things like the invoices, your VAT return, reconciling your bank, running your payroll, a bookkeeper is usually what you need. Its worth remembering that you don’t just need to outsource this to a bookkeeper when you have got to the point where you don’t have time to do those things anymore. A good bookkeeper can give you the confidence that everything is being done correctly and provide some really strong reporting that is a vital tool for measuring a business’s growth and success. Also, they can raise flags around issues that someone who isn’t a qualified could easily miss. Many a good business has hit major bumps in the road because of relatively simple accounting errors.
If you are looking for someone to prepare and submit your annual accounts or provide some tax planning then you should be looking to find an accountant.
And remember, it can be really beneficial to have both!