What is bookkeeping? What is accountancy? Chris Cooper explains the difference to answer the questions that often flummox start-ups.
Bookkeepers, accountants, they’re all the same, aren’t they? Well, no. While they both work with your accounts, they have very different skills. I have an analogy that might help explain:
Imagine your books are a person being operated on. In the room are several clinicians helping to get the job done. The accountant can be considered the surgeon – they’re the one doing the highly skilled work and analysing the risks. Bookkeepers are the scrub nurses who get everything prepared and in order to enable the surgeon to do their work.
What is bookkeeping?
So what is bookkeeping? In a nutshell, bookkeepers record and maintain accurate financial records to show what’s coming in and going out of your business at any given time.
Bookkeeping helps you to plan and budget effectively, foresee cashflow problems and provide accurate information for tax returns.
What do accountants do?
Accountants take the raw information provided by the bookkeeper and provide analysis. Accounting helps you to understand the true state of your financial affairs, allowing you to make decisions that make your money work harder. Accountants can also act on your behalf to file your annual accounts.
As a small business owner, it’s possible that you don’t need an accountant. If your business model is simple, especially if you’re a sole trader with a single source of income, you can easily submit accounts to HMRC yourself.
However, when you’re starting out, it can be daunting and you might want support to ensure you’re confident in what’s being filed. Bookkeepers can get your accounts into a place where all the information you need to fill out a tax return is clear and accurate, giving you that assurance.
As your business becomes more established, an accountant can help you to understand the opportunities for growth, your tax obligations and how to make the most of your finances, as well as submitting your accounts as they begin to get more complicated.
|Helps you to plan and budget effectively||Ensures your books are accurate and in order||Advises on improvements to cashflow||Provides analysis & recommendations for profitability||Ensures tax returns are accurate and compliant|
If you’re unsure whether you need a bookkeeper or an accountant, book a free consultation where we can advise you on the best route for your business. Our recommendations are based on experience never on sales targets.