When asked to describe the differences between Accountants and Bookkeepers most people would struggle to go past the basics. Some might say, ‘one manages the books’, whilst the other ‘balances the books.’ Or ‘one logs the information’, the other ‘analyses the information.’
The explanations in their basic forms are correct but even though these two functions go hand in hand they are very separate. They require different levels of skill, knowledge and expertise. The one thing they have in common is that they are both crucial elements of any business.
To avoid a complicated explanation of the differences between bookkeeping and accountancy, let’s use a simple example of a functional small business.
Joe has a business, he runs an online shop selling men’s shoes. He buys products and sells them for a profit on his website. To ensure that his business is operating legally Joe needs to perform certain tasks. Some are managed daily, and others are completed on a yearly basis. The tasks are separated out into the areas of bookkeeping and accounts.
To manage the bookkeeping obligations for his small business Joe needs to do the following:
Bookkeeping duties are managed on a day to day basis. They could be viewed as the financial administrative tasks of a business.
From a basic perspective the list outlined above may seem straight forward. And it would be remiss to say that Joe couldn’t manage these himself. Armed with an excel spreadsheet and a detailed knowledge of his business comings and goings he could easily manage the bookkeeping side himself.
However, this list doesn’t account for the following:
Time – Joe is busy creating his website, managing his customers, taking orders and dealing with the day to day elements of his business. Does he really have the time to manage the bookkeeping side?
Errors – inputting receipts and calculating the basics is easy enough but what if he loses a receipt, or can’t get the books to balance, would he know how to correct the error?
Spreadsheets – using an excel spreadsheet works for some but it comes with its own set of problems. What if the file gets corrupted and his data gets lost? Also is Joe ready for the new Making Tax Digital requirements as going forward an excel spreadsheet won’t be adequate.
Systems – most small businesses use online systems that enables receipts to be uploaded and data to be pulled at the click of the button. But with so many on the market which system should Joe use? And would he be able to use it correctly?
By choosing to hire a bookkeeper Joe could help to illuminate these issues. He could save time, money and remove the hassle factor from managing the financial administrative aspects of his business.
Bookkeeping is just part of the financial puzzle; the other piece is the accounts. This part is often viewed as the more complex side of running a small business.
To manage his accountancy obligations for his small business Joe needs to:
Straight away it is evident that the accounts side of the business is a lot more complex. And unless Joe has a significant understanding of these areas he will need to hire an accountant.
Experts – like any other accredited profession, accountancy obligations are forever moving, updating and changing. A qualified account will be on top of this, they will know the pitfalls and are fully equipped to deal with problems. Let’s face it with the amount of information they need to know they really are worth every penny.
Advise – having an accountant onboard Joe’s business can help in more ways than just answering questions about pounds and pennies. They are trained to advise him on areas over and above his accounts.
Yearly accounts cycle – with so many accountancy tasks to meet throughout the year an accountant would be able to tell Joe what he needs to do and when. E.g as the tax return deadline approaches Joe’s accountant will contact him to ask for the information required to complete the return.
The accounts elements of a business are not so scary once they are understood. But with each small business owner needing to adopt and learn new skills to manage many areas of their business some aspects are just better left to the experts. There are financial penalties for not completing accountancy obligations correctly or on time making it a risk just not worth taking for any business.
At Boffix we love supporting small business owners. We have developed affordable accountancy products to support our clients with their business’s financial matters. We can manage bookkeeping and accounts as separate services, but to be honest we prefer to do both together. By managing the whole puzzle, we can provide answers to questions based on the complete picture.
We have a team of professional accredited accountants and bookkeepers available to support your business. We offer training on our online accounts software so that you can have control and Realtime understanding of your business finances whenever you need. Our aim is to ensure that your business is doing the very best it can from a financial perspective.