Keeping track of your finances is an integral part of running a business. On a basic level, you need to know how much money is coming in versus how much is going out. It’s not just you who needs to know this information either, as HMRC will expect you to present your total income as part of your tax return too.
If you are wondering what is the difference between bookkeepers and accountants here is everything you need to know.
Bookkeeping involves keeping an accurate and detailed record of the financial transactions of your business. This includes all of your sales and expenses, which need to be displayed logically and accurately. If an accountant or HMRC were to look at your books, they should be able to easily identify all the money that has come into your business, as well as every penny that has left it.
As your company books need to record every financial detail, they need to be completed regularly. It is a task that some business owners feel confident enough to take on themselves. Though due to the time consuming nature of bookkeeping, it can also be outsourced to bookkeeping services too. Your books will then be passed onto an accountant to complete your tax returns, which is why they need to be up to scratch.
- Tracks income and expenses
- Records details in a physical or digital journal
- Completes books regularly
- The information they record is required to complete tax returns
Accountants will focus on the financial position of your business, based on the bookkeeping that has been presented to them. The easiest way to distinguish what an accountant does differently to a bookkeeper is that they react to what they see rather than simply record it. For example, if the books suggest that the business is losing too much money, they can suggest ways in which the business can save money. Or prepare information that will help the business secure a loan or a government grant to recover the situation. Find an accountant near you.
The main service that’s associated with accountants is tax returns, which bookkeeping plays an integral part of. Without the books, your accountant can’t relay how much your business has made to HMRC. Accountants will also be looking for ways they can save you money based on your expenditure. This could include offsetting the purchase of new equipment for your business against how much tax you need to pay.
- Interprets data on books to be able to complete tax returns and make savings
- Respond to what the books say to improve or maintain business performance
- Accounts are completed once a year for tax returns
- Can provide other services such as cash flow forecasting or help with securing a business loan
The Bottom Line
The everyday recording of your business’s financial transactions will be done through bookkeeping. By keeping your books up to date and accurate, you can then pass it to an accountant. An accountants job is to help make sense of your books in terms of how much you need to pay HMRC, plus to offer business recovery services if needed.
Another main difference is that accountants typically have more training, such as a degree in accountancy. Bookkeepers can qualify by completing a short course. Business owners can also decide to complete their own books, but need to ensure they are completed correctly and on time. Otherwise, they could face fines or inspections from HMRC.
Most businesses enlist the help of both a bookkeeper and an accountant. After all, taking care of the financials of your business is like running a company in itself. But with the right knowledge, all will be smooth sailing when it comes to your financial accounts.