I'M OFTEN ASKED 'WHAT IS THE DIFFERENCE BETWEEN A BOOKKEEPER AND AN ACCOUNTANT?
So I thought I would write an answer to try to clarify it.
In simple terms a bookkeeper manages the recording of the ongoing financial transactions of a business.
But what is a financial transaction? It is a record of a product or service that a business buys or sells and all the business spending and income that goes through the bank. Recording all these transactions on a regular ongoing basis is the minimum requirement for all businesses. In fact it is the law in the UK, regardless of size, to keep a record of all financial transactions. This is known as Bookkeeping.
The term ‘Keeping the books’ goes back to the days before computers and calculators when all transactions were recorded on larger physical books known as ledgers.
As well as recording financial transactions, there are other bookkeeping requirements that some businesses need to complete including VAT calculating and reporting to HMRC, payroll for employed staff, stock control, credit control, tax returns and other industry special tasks. These tasks are now usually completed on accounting software such as Xero and Quickbooks.
Some smaller businesses complete their own bookkeeping but many employ the services of a qualified bookkeeper who are regulated by an official body, such as the International Association of Bookkeepers (IAB) or the Institute of Certified Bookkeepers (ICB) and also in the UK by HMRC.
So what can an accountant do that a bookkeeper can’t? In the UK an accountant’s main role is deal with Limited Companies that have a high-level compliance such as filing Corporation Tax Returns and accountants also give strategic business advice on the management of businesses. Good accountant’s will also conduct regular tax planning to minimise the tax liabilities of the business and its directors, and providing advice on cash flow management if relevant.
An accountant or CPA is also qualified to a higher standard and will usually only have contact with a client once a year, whereas bookkeepers work on a weekly or monthly basis.
So, in summary, bookkeepers work closely with the business owner on a regular basis; completing all tasks required by sole traders including VAT and Payroll and accountants and CPAs concentrate on compliance and tax advice for larger businesses and Limited Companies.