What’s the difference between an accountant and a bookkeeper?
Posted on 12th Apr 2022
Have you ever wondered what's the difference between an accountant and a bookkeeper?
In this video Kim explains the difference between an accountant and a bookkeeper and what they each do…
WHAT IS THE DIFFERENCE BETWEEN AN ACCOUNTANT AND A BOOKKEEPER?
You will often hear the terms Bookkeeping, Bookkeeper, Accounting & Accountancy. Have you ever asked yourself what the difference is between the them? Well in this video all will be explained!.
As I’m sure you would expect there is a lot of overlap between the areas.
So, what’s the definition of bookkeeping . Well, bookkeeping is the process of recording your company’s financial transactions into organized accounts on a daily, weekly or monthly basis.
I’d recommend daily or weekly as the information will be more up to date. As, when you keep transaction records updated, you can generate accurate financial reports to help measure business performance and make better business decisions.
Accounting, is about taking that data and then producing financial reports and statements. Whether your company needs an audit , in which case they would take the data and check its existence is correct, if not they would use it to produce your Annual Statutory Accounts for companies house and taxation computations and reports for your business and personal tax for HMRC.
But producing the financial reports and statements is just one element. Good Accountants actually start where the bookkeeping ends. They report on the data , but more importantly interpret it, explaining it and often giving the business owner ideas to make it better.
So, whether you do the bookkeeping yourself, employ an external Bookkeeper or outsource to your Accountant (if they offer this service – here at Krystal Clear Accounting we do but not every Accountant does), it is vital for success to stay on top of it. Do not leave it for weeks at a time, because you got busy or don’t enjoy doing it. If that’s the case then outsource it!
With todays cloud accounting bookkeeping packages there really is no excuse. You can get it set up properly in the first place, to really represent your business with a bespoke chart of accounts, so it is easier to read reports.
You can get your business bank accounts and credit card statements linked so it pulls in the transactions and then get bank rules set up to make the processing easier. It doesn’t do all the work for you, but does take some of the heavy lifting away and saves you time.
There are lots of Cloud Accounting packages on the market so take time to check them out if you don’t have one currently. The market leaders tend to be xero & Quickbooks, however their are others like Sage and Clearbooks and some lighter and cheaper versions too like Free Agent. Don’t just buy on price though, – check them out, which one has the best functionality for your business and can be added to as your business grows. Xero & Quickbooks have lots of Add-ons to make connecting other parts of your business simpler like stock control, linking sales platforms and reconciling payments etc.
Check out our other videos and articles in our knowledge centre for more information on cloud Accounting and other topics.
So at its simplest, bookkeeping involves taking all the records of the business and processing the in to some financial software. So for example, a internal bookkeeper would often raise the sales invoices for company and process any purchase invoices or expenses. A bookkeeper often then chases the debts, make sure the payments are made to suppliers and maybe even produce or at the very least process the payroll journals, processes the VAT returns and deal with any petty cash transactions.
Depending on the complexity of your business you will probably be operating the purchase /sales and general ledger, a list of all the debtors and the suppliers and amounts outstanding.
From these ledgers will come the initial figures needed to then prepare a set of accounts so accountants will start with these, then produce adjustments and then put them into a set of accounts.
So what does an accountant do that a bookkeeper traditionally doesn’t – well first they would take the bookkeeper’s figures and actually prepare some adjusting entries that aren’t involved in the bookkeeping. These might be accounting transactions or things where there wasn’t actually a cash movement, but need recording in the set of accounts
An accountant will take the figures and put them into The actual financial statements – A detailed balance sheet, profit and loss and a cash flow, and then the accountant will analyze them. They will also prepare all the tax computations and forms.
More importantly, they’ll talk to the business owner about what those numbers mean and how could they be improved by taking certain courses of action.
An accountant will often prepare monthly Management Accounts . These are internal just for the business owner. We will produce the information and then sit down with the business owner to explain what they mean and how the numbers could be improved by certain courses of action. So in this instance your accountant is effectively acting as your outsourced finance director helping you to get the best out of your business working with you, the business owner to fully understand the impact of different courses of action on their numbers. Offering guidance and often an early indicator if the business needs to raise finance for example. Check out our other videos on Management Accounting for more info on this.
Are Accountants and Bookkeepers Not the same thing?
Well no, actually they are not, whilst their can be lots of crossover, a good accountant often starts where the bookkeeper finishes.
As we have alluded to, lots of accountants do bookkeeping and lots of bookkeepers will prepare some of the accounts & returns. Both are incredibly important to any business. Bookkeepers though don’t traditionally tend to get involved in the tax side of business.
What we often find is that a number of our clients can do the basic bookkeeping themselves, particularly with some of the software that’s out there now. It takes away a lot of the technical side and makes it a simple as possible for business owner to do themselves.
You can for example take photos of purchase invoices and expenses to put them into the accounts with software like Dext, Hubdoc & Autoentry to name but a few.
You can get the software to chase debtors too or just to send out your initial invoices – If you’ve raised the sales invoices using say xero, you can just click and send an email to your debtors, and also chase outstanding invoices that way too!
A word of warning though, whoever you choose to do your bookkeeping and be your accountant, please make sure they are qualified and a member of an institute and do keep up their continual professional development. Accountant is not a protected title and anyone can call themselves one. We’ve seen a lot of businesses almost fail or at the very least be costly because of the advice they have been given!
If you’d like to have a chat over a coffee (Virtually or face to face) and to see what is possible, all you need to do is call me or one of my team on 0161 410 0020 or email email@example.com
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It is important that you take professional advice before making any decisions based on the information that you learnt here. While every effort has been made to make sure it is accurate it cannot be precisely tailored to your personal circumstances. This article is for general information only and no action should be taken, or refrained from, as a result of this information. Professional advice should be taken based on specific circumstances in each individual case. Whilst we endeavour to ensure that the information contained in the article is correct, no liability will be accepted by Krystal Clear Accounting which is a trading name of Kim Marlor Associates Ltd or damages of any kind arising from the contents of this communication, or for any action, inaction or decision taken as a result of using any such information.