Why People Confuse Bookkeepers for Accountants and Vice Versa
Both professions engage in managing finances, bookkeepers and accountants support the business in different ways, and in different stages of the financial process. Their functions sometimes overlap, because bookkeeping is one part of the whole accounting process.
Bookkeepers are involved in the business’ day to day finances, recording transactions and Accountants provide financial analysis based on the bookkeeper’s data including tax filing and end of year accounting.
In a nutshell, bookkeeping involves the following functions:
- Recording daily financial transactions: income and expenditure
- Maintaining the general ledger, ledger accounts and journals
- Financial reporting to owners/directors
- Reconciling the bank account
- Completing VAT returns
- Managing Cashflow
- Paying suppliers
In a nutshell, an accountant has the following functions:
- Analysing the data in the bookkeeper’s financial reports
- Acting as a consultant in decision-making
- Making financial forecasts and recommending strategies
- Preparing financial statements
- Filing annual taxes
There are many other functions each can do, Accountants for example offer a complete bookkeeping and payroll service and some bookkeepers can complete monthly payroll duties too. Outsourcing your financial record keeping enables a smaller business owner to manage your time better, ensure your records are accurate and filing is completed on time.
Using a qualified accountant or bookkeeper is essential and also check they are registered too as they will have to comply by their professions code of ethics which protects your business.
In house bookkeepers
Some businesses employ a bookkeeper, which could be the financial controller or accounts administrator to do their day to day accounts and this can work very well if they are experienced and preferably have some form of professional training or qualification in bookkeeping. But they can also cost the employer more if they do not have the knowledge and skills to carry out the required tasks to the correct standard. This leads to increased accounting costs at year end and errors within your records, which could result in your company claiming/paying incorrect taxes.
One of my clients had an employee who was managing their bookkeeping but they didn’t know the tasks well and made adjustments to reconcile the bank. They poorly managed the bookkeeping which has cost the employer thousands in lost claims such as CIS, because the employee didn’t know how to process CIS in the software, never completed a return and never asked for help. They just credited the invoice with the amount rather than using the correct CIS codes. This company also were using incorrect VAT codes which took me some time to identify and rectify. I worked closely with their accountant to ensure the changes I was making to the codes were correct and seek advice on some of the Tax elements, because as a bookkeeper I am not a Tax Accountant!
So the moral of this Blog is, if you are not qualified at bookkeeping you maybe better to source someone who is to do your day to day bookkeeping, it could improve your profit and help you pay the correct amount of taxes!
When I started my first business in the 1990’s I had very little bookkeeping knowledge. At school I didn’t like maths, but as a business owner I had to embrace numbers. I learnt how to write a business plan, cashflow forecast, budgets and profit and loss. Fast forward 5 more businesses I decided to do a qualification in finance and accounting. This led me to getting a certificate as a bookkeeper. Which allowed me to become a member of International Association of Bookkeepers (IAB).
I started bookkeeping on paper using special accounting books all those years ago, some businesses still do this!!
In the early 2000’s I moved onto Excel then started using Sage about 2 years later. Software was a breeze, it was quicker, it was easy to find things and create professional invoices. Since then, I have learnt Xero, QuickBooks and FreeAgent too. Accounting software is a massive bonus for a business owner. It allows you to quickly invoice clients, understand who still owes you money and who you owe money to. Reports are easily downloaded so you can see your financial position.
Using accounting software is time saving if you’re VAT registered or need to complete Self Assessments for Tax. The software pulls across the data into the right boxes with a click of a button making submissions easy.
If you need help with your bookkeeping find a qualified accountant or bookkeeper and have a chat with them first. Perhaps all you need is some training or accounting software. If you want to find out more, please contact Eris Business Services.