Most business at some point will need to hire a bookkeeper or accountant. Although fundamentally different, both jobs deal with accounts and payments, and these are areas in which companies don’t want to make mistakes. As any small business grows, so too does the likelihood of it needing additional financial help.

What does a bookkeeper do?

  • Producing and processing invoices
  • Flagging up missed payments
  • Recording financial transactions
  • Managing payroll
  • Paying suppliers and creditors
  • Reconciling incomings and outgoings
  • Managing payments from clients

A bookkeeper will take what would otherwise be huge reams of paperwork, including invoices, bank statements, bills and receipts, and turns them into something orderly and easy to access and understand. Most bookkeepers will use an accounting software such as Xero, which can be accessed by other staff members and updated by anyone on the team. Bookkeepers will usually visit part time to work on the books, depending on the requirements of the company.

Some bookkeepers will also prepare VAT returns and file self-assessment returns as well, but these tasks are more suited to accountants.

What does an accountant do?

  • Planning, preparing and filing tax returns
  • Auditing services
  • Helping with financial planning and putting together a business plan
  • Analysis of a business’s financial standing
  • Helping to source funding

Accountants are required to deal with more complex financial matters than bookkeepers, including tax returns and preparing accounts for compliance purposes. They should also be involved in the strategic management of the financial affairs of the business, rather than the day to day management of transactions. A good accountant can act as a financial advisor to the business, offering advice on cash flow management and whether or not certain ideas are financially viable for the business at this time.

Because accountants deal with more complex business decisions, they often cost more than bookkeepers.

How often do you need them?

Bookkeepers can work for businesses weekly, fortnightly or monthly depending on the size of the operation and how up to date they need their financial records to be. For smaller businesses this will be less often, and the time needed to work on the books will increase as the size of the company does.

Accountants can be brought in on a less frequent basis, until the business is large enough to require their own on-staff accountant. An accountant will be required for the preparation of items such as the annual accounts or quarterly VAT returns, or they might be involved in special projects – to work on a business plan or help put together a cash flow forecast, for example.

When do businesses need a bookkeeper or accountant?

It is not necessarily a case of either/or when it comes to dealing with business accounts. Because an accountant helps with big financial decisions and strategic advice, whilst a bookkeeper is more involved in day-to-day financial tasks such as payroll and invoicing, both have their benefits to businesses.

Smaller companies might get away with bringing in both an accountant and bookkeeper on an as-and-when-necessary basis. So, an accountant can be brought in when it is time to file taxes, or as an advisor when deciding whether or not to secure a new line of credit. Meanwhile a bookkeeper might only be needed for a day or two towards the end of each month, but the need for them will be increased as the company grows.

When companies should bring in a bookkeeper

Most companies will find that, within a few months of starting a business they will need to think about hiring bookkeeping services. Bookkeeping can easily be done by someone within the company at first, but it helps to have someone solely dedicated to spotting trends and keeping an eye on finances earlier rather than later. This will ensure that company directors are able to put their full focus where it is needed, and that small financial mistakes aren’t missed, causing big problems later.

When an accountant is the best option

An accountant could be a boost to a company at any point in the business. Right at the beginning an accountant can help to put together a business plan, strategies on the best way to extract profits from the business and so on, giving the business a strong footing for the future. Accountants are useful to call upon throughout a business’s life, when making decisions or dealing with financial problems.

What qualifications are important?

Anyone can set up as an accountant or bookkeeper, but it is important for businesses to put their finances in the hands of professionals.

Bookkeepers don’t need to be formally qualified, but will usually have trained with:

  • Institute of Certified Bookkeepers (ICB)
  • International Association of Bookkeepers (IAB)
  • Association of Tax Technicians (ATT).

Even if qualifications aren’t necessary, having had some experience in a financial role is important before a bookkeeper should be trusted to take care of a company’s accounts. Many bookkeepers will have worked for a bank or other financial institution in the past before becoming self-employed.

The word ‘accountant’ is not regulated, so anyone can present themselves as such without formal training or experience. A legitimate accountant will have trained with one of the main four UK Chartered Accountancy Institutes.

  • Chartered Institute of Management Accountants (CIMA)
  • Institute of Chartered Accountants In Scotland (ICAS)
  • Association of Chartered Certified Accountants (ACCA)
  • Institute of Chartered Accountants in England and Wales (ICAEW)

Again, experience is relative but an accountant should have some financial advisory history before any business should be comfortable placing control over financial decisions in their hands.

To sum up:

Smaller businesses and sole traders may want to start out dealing with their own accounts to save money in the short term and whilst the accounts are fairly small and easy to deal with.

An accountant is a good option to hire for a one-off fee when setting up the company, as they can give advice and help to write up a solid business plan that will help small companies to get off the ground. A bookkeeper is a great choice to be brought in as businesses start to grow.

Limited companies need to work with an accountant, to help them to take care of tax returns and VAT, as well as PAYE. Even if your business is small an accountant can provide vital advice that allows you avoid paying too much tax than you need to. Often, the savings accomplished are far in excess of the fees charged so it is well worth while investigating this before you submit any tax returns.

Talk to TFMC today

TFMC offer fully qualified and experienced staff in both the bookkeeping and accountancy roles.  Our helpful advice team can walk you through the most cost-effective package for your business, combining expert advice with competitive pricing. Contact us on 0800 470 4820 or email to find out more.

Martin Beckenham
Martin Beckenham

Martin Beckenham runs The Financial Management Centre in Ashford & Maidstone and serves as the head bookkeeper in Ashford and Maidstone. Martin is a Certified Bookkeeper with the Institute of Certified Bookkeepers. He has over 35 years of experience in the Finance and Administration sector, firstly in the Oil Industry and more recently as Head of Statutory Government body.