However, knowing the differences between bookkeeping and accountancy will help you have more control over your finances.
You’ll have the right people doing the right job using their different skills ensuring your accounts are as accurate and up to date as possible, getting the best advice from the right person.
1. A doctor or a nurse?
You might make the comparison to a doctor and a nurse. We understand they need each other but they have different skills, experience and knowledge.
A doctor trains for longer and therefore assesses trickier, more complicated health conditions, sees more of a variety of problematic conditions and has more responsibility.
On the other hand, a nurse may carry out more routine tasks such as vaccinations and health checks and therefore be better at them, knows when there’s a problem which needs to be escalated to a doctor and carries out the doctor’s instructions as required.
2. Day to day or year end?
Doing regular routine work, a bookkeeper spends more time working on your figures and has more regular contact with you. They are therefore well placed to keep any eye on your daily financial health, your ‘nurse’, escalating any problems to an accountant, your ‘doctor’, if needed.
Using software or spreadsheets a bookkeeper keeps your management accounts up to date, prepares and files your VAT returns, running reports, checking aged debtors/creditors, chasing up and updating as required.
A bookkeeper ensures your staff are paid correctly, updating PAYE tax codes, starters and leavers are correctly dealt with, checking pension payments due and dealing with special cases such as apprentices.
Due to this regular access and contact, following consultation with your accountant, it’s likely that your bookkeeper will also more effective in complying with HMRC’s new MTD requirements.
After advising you on setting up your business, your accountant is mostly responsible for year-end work.
This includes preparing and filing your year end statutory accounts ensuring compliance with accounting standards ready for the public, HMRC and creditors, preparing and filing your corporation tax and income tax returns.
During this process, your accountant resolves many varied issues, advises you on year end journals, optimum salary/dividends and director loan account issues as well as bigger picture concerns such as cashflow, profit margins, forecasts and your business plans.
Your accountant also prepares dividend vouchers, board meeting minutes, checks in on tax treatments and issues, such as the VAT treatment of overseas sales, and whether a benefit in kind needs to be reported, instructing the bookkeeper as required.
Of course, there’ll be some work done during the year, such as reviewing and interpreting your management accounts and providing proactive tax advice.
3. So, it’s different skill sets for different work?
Yes. Bookkeepers get to know the finer details of bookkeeping and payroll software together with navigating HMRC online, becoming extremely fast and efficient for you.
They also develop a good idea of when something doesn’t look right. They are your ‘early warning system’ able to escalate something to your accountant before it becomes a bigger problem.
Accountants are trained to know more about other ‘bigger picture’ aspects of your business maintaining a watching brief in case they are needed.
4. Who should I contact to provide these services?
Many accountants provide bookkeeping services within their offices, or you can hire a bookkeeper separately, appointing an accountant for their skills as described above. After all, we all use both nurses and doctors!
On the Spot Accountants is an ICAEW Business Advice Service firm.