A question we get asked a lot is ‘Do I need a bookkeeper if I have an accountant’ the honest answer to this question in a lot of cases is a resounding ‘NO’.
You do not need a bookkeeper if your accountant does your bookkeeping for you every month and goes through your figures with you at least every quarter. There are a lot of accountants out there that will be in contact with you on a regular basis and this is fantastic.
It is so important that you know how your business is performing each month so you can make informed financial decisions. Sometimes during the life of a business owner, you will have to make hard decisions like cutting overheads including staff and maybe premises. These decisions are a lot easier when you can see your business’ financial performance monthly.
As business owners, you are great at what your chosen profession is but maybe not so great at the financial side of things. So, without regular contact with your accountant, you will probably be unaware that there are warning signs. It is very good practice to monitor your Key Performance Indicators (KPIs), these vary from business to business but generally can relate to your sales, banking, and overheads for example but can also relate to client increases, leads generated, cold calls made and meetings.
Some accountants though, will only speak to you once a year to ask you to bring your carrier bags full of receipts. They will then spend hours going through your receipts and try to make sense of it all before producing your year-end accounts or self-assessment return if you are a sole trader.
The problem with this way of working is that if you have made a ‘Loss’ you will only know about it at the end of the year when it is too late to do anything about it!! Also, if your accountant needs a copy of an invoice from the start of your year, the chances are that it has been lost!
This way of working though can be ok in a lot of cases if you have a handle of how you are performing financially. Your accountant may also not be able to start on your accounts straight away so you could be 3 or 4 months into your new financial year, still making losses!
There are a lot of overlaps but generally the following tasks represent the roles of an accountant and a bookkeeper:
An Accountant will:
- Check the financial information provided by the business owner, bookkeeper, or themselves.
- Make any adjustments needed, post journals, post pre-payments and accruals.
- Ensure that your business is claiming all the tax benefits allowances it can and offer invaluable tax advice.
- Prepare draft annual accounts or self-assessments for approval by the business owner.
- Calculate Corporation Tax payable.
- Explain what your accounts mean and go through the figures with you.
- Assist with forward planning for the coming year.
A Bookkeeper will:
- Keep a record of all your business’ income and expenditure ideally using online accounting software.
- Reconcile your bank, making sure that every entry / transaction is accounted for.
- Prepare your VAT returns (if you are VAT Registered) and submit them to HMRC.
- Process your payroll for you in accordance with your pay runs.
- Produce monthly reports and management accounts.
- Organise regular 1-2-1 reviews with you to explain your numbers to you without the jargon.
The best solution of course varies from business to business, but our advice is having both a bookkeeper and an accountant is a great way to operate. They will both bring different skillsets and knowledge to your accounting table.
It is vital that you know how your business is performing on at least a quarterly basis so make sure you ask this when choosing professionals to work with you.
An accountant in general, will have a wealth of in-depth tax knowledge that a bookkeeper will not necessarily have in their armour.