What are the differences between a bookkeeper and an accountant?
I- Why should I use an accountant or a bookkeeper?
Use the services of an accountant is not a requirement, all the companies are free to choose if they need or not an accounting. However, as the Section 386 of Companies Act 2006 stipulate: “Every companies must have accounting records who must contain: entries from day to day of all sums of money received and expended by the company…”
Accountants will do the end of year accounts and will be able to see if your company was profitable or not. If you don’t have the accounting knowledge needed to complete this task, I suggest you to hire an accountant.
The files and documentation that you have to provide depend of your company’s size. But basically your financial account must contain:
- Profit and loss account
- A balance sheet
- Notes about the accounts
- A director’s report
- An auditor’s’ report
- The name and signature of company director
If you forget something or if you are late with it be careful because some penalties may apply. For example, if you file your accounts a month later, you may be liable for a penalty of £150. With an accountant or a bookkeeper you will avoid such penalties – if they do all the work on time.
II- Accountant or bookkeeper: what is the difference?
An accountant is a person who manages your account; he’s in charge of the financial aspect of your company.
The mains tasks that he can do for you is to:
- Prepare the annual statements of accounts (reports, budgets, business plans, commentaries and financial statements)
- Complete the required legal and compliance documents
- Prepare taxes returns and reporting tax requirements
- Controlling income and expenditure
- Administering payrolls
The accountant fees depend on the company size and the time spent. It costs approximately around £500 and £5000 per year.
As Rafael Dos Santos explains in the video below, bookkeepers manage and control all the transactions, daily or weekly.
The main tasks completed by a bookkeeper are:
- Accounts Payable and Receivable
- Check if the payable and receivable are correlated with the bank account
- Calculate the employee’s salary
- Publish financial report
Bookkeeper’s prices may differ between £70 and £500 per day (if they are self employed), it depends on the services that you require and the hours that he will work for you.
The main thing that you have to consider is the price and their years of experience. Indeed with an accountant you will pay more because his services are more complex than the bookkeeper. Bookkeepers are limited to the financial transactions and accountants are not, they can handle the entire accounting process.
III- Accounting software
If you really want to save money you could be doing your bookkeeping by yourself using an accounting software. It would cost between £30 and £500 if you want more complete software. It will help you with the daily tasks, reports, VAT returns, bank reconciliations, etc. Using an accounting software will give you a lot of advantages like speed and simplicity for example. All the statements and reports are automatically created and the risk of calculation mistake is limited. We advise you to use softwares that are stored in the cloud, so you don’t risk lsoing data and catching a virus that can destroy your data.
Furthermore you need training if you are not confident with it.
Some bookkeeping softwares: