What Is A Bookkeeper?
We have a lot of people ask us what a bookkeeper does so we have taken an in depth look to give you the low down on a bookkeeper.
Let’s start by looking at the dictionary definition:
Bookkeeping is “the skill or occupation of maintaining accurate records of business transactions”.
Bookkeeping, as the word suggests, is about ‘keeping books’ and is the first step in the accounting process. The bookkeeper is the person who is responsible for keeping an accurate and complete record of the financial transactions of a business. They lay the groundwork for accountants, providing data that is detailed, they are primarily concerned with accurately recording financial data on a routine basis.
How Does A Bookkeeper Differ From An Accountant?
The dictionary definition of an accountant is:
"a person whose job is to keep or inspect financial accounts."
An accountant, on the other hand, would focus on the bigger financial picture and performs tasks that affect the whole accounting process. They would build on the information provided by the bookkeeper and then classify, analyse, summarise, interpret and report the financial information. The books must be kept up to date and accurate by the bookkeeper, but then they are passed to the accountant for further financial analysis which adds some meaning.
More On A Bookkeeper's Role
- Accurately record financial data
- Ensuring that entries in and out of the company’s accounts are correct on a daily basis
- Record and calculate income and expenses
- Undertake activities in support of this
- Processing invoices, receipts, payments, and other financial transactions
- Processing and maintaining your payroll system
- Preparing initial financial statements
- Reconciling accounts and preparing reconciliation reports
- Managing your accounts receivable and accounts payable, i.e. amounts owing by debtors, and amounts owing to creditors
- Calculating VAT
- Designing, establishing and reviewing accounting systems
There are a wide variety of other tasks that a bookkeeper can undertake and much like the tasks outlined above, they are generally related to the ongoing maintenance of your financial records. For example, many bookkeepers raise invoices, deal with day to day transactions and file VAT returns. They are also likely to process payroll on behalf of the business to ensure that tax and NI contributions are correctly calculated and reported to HMRC.
Bookkeepers have the skills and knowledge to explain financial information to business owners and make clear the meaning of reports based on this information. They can also get involved with more detailed cash flow work to help managers make decisions based on accurate financial data. Some businesses process the day to day work in-house and engage a bookkeeper to check and supervise this work, carrying out the more in-depth bookkeeping processes on a weekly basis. This can be done on the company’s premises or remotely using secure, cloud-based software.
We have found we have been more in demand then ever before in the COVID-19 coronavirus pandemic, providing guidance on cashflow and budgeting, financing options and generally how to keep the business running with little to no income. We have explained and carried out the complicated Coronavirus Job Retention Scheme (CJRS) keeping our clients up-to-date with the changing furlough guidelines, helped our clients understand the Self Employment Income Support Scheme and how to claim what they are entitled to and even created a page on our website to provide this guidance to anyone (client or not) that needs help.
More On An Accountant's Role
The role of an accountant in your business, while potentially encompassing some bookkeeping tasks, is often more advisory and analytical in nature. An accountant will be in a position, through analysis of past performance, to offer financial projections and advice on future financial elements of your business. Further services offered by your accountant can also include:
- Taxation advice and planning
- Business establishment assistance
- Auditing
- Corporate reporting and compliance
- Superannuation fund advice
- Financial management advice
While not an exhaustive list of an accountant’s services, the tasks outlined here serve to highlight the analytical and advisory nature of their position. Given that there are substantial differences between the services offered by bookkeepers and accountants, it can be seen that both are important to the growth of your business. Instead of viewing them in a ‘bookkeepers vs accountants’ situation, it is important to understand that your accountant and bookkeeper work best together to serve the financial requirements of your business.
Bookkeepers And Accountants Qualifications
Surprisingly, bookkeepers aren’t required by law to have any formal education but the right qualifications can certainly help demonstrate expertise and understanding of the complicated accounts requirements.
Cashtrak take their bookkeeping qualifications seriously. Carol is a Fellow at the ICB - Fellow is the highest grade of ICB membership, reserved for the best of the best and ICB bestows this honour on very few, all of our bookkeeping staff are ICB qualified.
Our staff are qualified to produce year end accounts for some small businesses which means these businesses do not need an accountant in addition to us, however some bigger clients require an accountant to produce their year end accounts and we work closely with a number of local, High Wycombe accountants as well as some further afield. We are also qualified to file tax returns on behalf of clients.
Accountants need to prove their ability through qualifications. Those just embarking on their accounting education often begin with AAT courses. The Association of Certified Chartered Accountants (ACCA) courses, are internationally recognised qualifications that demonstrate knowledge and expertise in a wide range of areas including financial law and ethics.
Conclusion
Bookkeeping and accounting have considerable overlap because the first can be considered a part of the second and accountants are able to perform the tasks a bookkeeper does however the fees charged by a bookkeeper will differ significantly to what an accountant charges as an accountant oversees the books, part of their role is interpreting data and providing advice about financial decisions that will affect a business.
The choice is not whether a bookkeeper or an accountant should be engaged, rather how can to delegate tasks to utilise the skills of the bookkeeper and accountant.