Do I need a bookkeeper or an accountant?

Although starting a new business is exciting, what's not exciting is having to keep on top of the financial paperwork and filing tax returns.

When you're just starting out, managing all this admin can be overwhelming, so when should you call on a professional to help? And what exactly is the difference between a bookkeeper and an accountant? Do you need one or both?

This blog explores the key differences between the two and in what situations you might need them.

What is a bookkeeper?

You hire a bookkeeper to keep tabs on your financial transactions - from incoming payments and other sales to expenses. Bookkeepers keep your financial records in tip-top condition, giving you a picture-perfect idea of where your business is financially. This insight into your finances lets you make business decisions based on accurate financial projections.

What services do bookkeepers offer?

• Accurate financial record keeping. Every time you make a sale, or purchase an item for your business, each transaction will be recorded by your bookkeeper.
• Financial reporting. The bookkeeper will report on your profit and loss and give you insight into cash flow, which is essential for business growth.
• Accounts payable. For any invoices you need to pay, a bookkeeper can oversee them, ensuring they’re made correctly and on time.
• Bank reconciliation. Bookkeeping includes reconciling your bank transactions with those actually made. Matching the transactions like this helps identify duplicate or fraudulent payments early.

What qualifications do bookkeepers have?

Bookkeepers are detail-focused, analytical professionals. Although they may hold qualifications such as a Level 2 Certificate in Bookkeeping and be members of professional bodies, including the Institute of Certified Bookkeepers (ICB), they don't have to hold any formal qualifications to become one.

How much does a bookkeeper cost?

Bookkeeper rates can depend on the size of your business, their experience and how much work you want them to undertake. Usually, you pay by the hour for a bookkeeper with UK bookkeeping rates ranging from £15 - £65 per hour, with the average rate being £25-£35 per hour.

What is an accountant?

An accountant focuses on keeping your business tax-compliant. That means giving professional tax advice, helping you identify tax savings and preparing and submitting your tax returns.

What services do accountants offer?

• Preparing and submitting tax returns. Accountants are experts in preparing and filing company tax returns. So, although you don’t need an accountant to do this, using one does ensure your company remains tax-compliant and submits returns before HMRC deadlines.
• Payroll services. Many UK accountants also offer payroll services, including setting up PAYE schemes, processing your employee payroll, deducting applicable taxes, overseeing auto-enrolment and more.
• VAT returns. VAT returns are usually submitted quarterly and can be completed by your accountant. An accountant can also oversee VAT registration.
• Bookkeeping. Some accountants may offer bookkeeping services, so if you’re looking for someone to do both bookkeeping and accounting, look for this specifically.
• Auditing. If your accountant is a qualified auditor, they can carry out audits. Limited companies must submit audited accounts to Companies House unless they are audit-exempt, i.e. smaller companies.

What qualifications do accountants have?

An accountant will hold professional qualifications such as ACA or CIMA and will, therefore, likely charge more for their services than bookkeepers. They are usually members of professional bodies, including the Association of Chartered Certified Accountants (ACCA) and the Chartered Institute of Management Accountants (CIMA).

How much does it cost to hire an accountant?

Accountants can charge an annual or monthly fee with fees starting at around £250 + VAT per year for company accounts and corporation tax, increasing with company turnover. If you’re self-employed as a sole trader looking for someone to prepare and submit your self-assessment tax return, fees can be as little as £50 + VAT per year.

Before signing up with an accountant, check what their fees cover.

Do I need an accountant or a bookkeeper?

• If you’re looking for VAT or tax planning advice, you’ll need an accountant.
• If you want someone to complete your tax return, you’re looking for an accountant. Accountants figure out the best way to save you money when paying taxes. They’ll submit your tax return to HMRC, but you will usually still have to pay the final tax calculation.
• If you want someone to manage invoices, profit and loss and all financial transactions, you’re after a bookkeeper.

Can I manage my own accounts and do my own bookkeeping?

Absolutely! You can manage both of these things yourself. Investing in invoicing software can be very useful when bookkeeping yourself. This software allows you to easily reconcile your incoming and outgoing payments against your bank statements (in fact, many will automate this for you). And you’ll get an accurate picture of your business finances through their business dashboard.

When it comes to accounting, if you’re a small business with no employees or you’re a sole trader, registering for self-assessment is straightforward and completing and submitting your tax return is simple. But if your business employs staff or is a growing company, you might benefit from a professional accountant to take advantage of tax efficiencies and free yourself up to focus on driving business growth.

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