Many years ago, early in my former career as an IT Consultant, I attended a presentation by a highly respected software developer in which he posed a question of significant interest to the audience. His answer was: "It depends." People are keen for black or white answers to questions, but more often than not answers depend on many different factors and so it is when deciding between a Bookkeeper or an Accountant.
If you have come to this blog post without first looking at my website then I had better declare my hand. I am a Certified Bookkeeper and as a consequence this post is very much from the bookkeeping perspective. Clearly I know more about Bookkeepers than Accountants, but this is not an anti-Accountant diatribe, quite the opposite. As the director of a small Limited Company for many years, I had nothing but positive experiences with my chosen Accountant and they gave me endless good advice. Bookkeepers and Accountants often work together in partnership targeting specific areas of the accounting workload which best suits their knowledge and experience. I will return to this later.
Accountants undergo a much longer period of training than Bookkeepers which equips them to analyse and interpret accounting data in much more detail than Bookkeepers. They can offer greater insight into how successfully a business is being operated and offer advice on how business problems might be addressed or how an already successful business might develop further. Some Accountants may well have specialist areas of expertise and typically can offer tax advice and planning. For sure Accountants can do the work of Bookkeepers, but if I stray into the risky area of analogies for a moment; would you buy a high performance saloon just for a regular trip to the supermarket? Of course you can, but it may not be the best use of your resources if finances are a little tight.
Bookkeepers come in a variety of flavours, not least of which is their associated regulatory body. I belong to the Institute of Certified Bookkeepers (ICB), but there are other recognised bodies such as the Association of Accounting Technicians (AAT). Everyone is very loyal to their own organisation and will doubtless extol their virtues. However, the important point to consider when choosing a Bookkeeper is to ensure they are properly qualified and belong to a regulatory body approved by HMRC for anti-money laundering purposes. You can then be confident your chosen Bookkeeper is both competent and regulated.
Let's say, that you have opted for an ICB Certified Bookkeeper (I am using the ICB as an example, because I am familiar with the hierarchy of qualifications). You need to select a Bookkeeper with the qualifications necessary to meet your business needs.
- Level 3 - An ICB Bookkeeper qualified to level 3 is licenced to practice and offer services which include the preparation of final accounts for Sole Traders, Partnerships and Not for Profit Organisations. They can also maintain books (but not undertake the year-end processing) for other organisations such as Limited Companies, LLPs, CICs, etc. At level 3 you can gain additional qualifications, for example Self Assessment Tax and Payroll Management.
- Level 4 - An ICB Bookkeeper qualified to Level 4 can post year-end adjustments and prepare draft final accounts for the organisations not covered at level 3 (with the exception of unincorporated trusts).
- FRS105 - If you complete the FRS105 qualification, then you can prepare and submit final accounts for a Micro-entity (a very small incorporated company - reference gov.uk for the current thresholds).
The level to which you are qualified and the supplementary qualifications you have achieved will enable you to register with HMRC as an authorised agent for various different services such as Self Assessment, Corporation Tax, VAT and PAYE/CIS. An authorised agent is able to act on a client's behalf once a client authorisation process is complete. Both Bookkeepers and Accountants may apply to be authorised agents providing they have the requisite qualifications.
So you can see "It depends." If you have decided on an ICB Bookkeeper then you can find the nearest to you offering the services you need via the ICB practice directory: http://www.bookkeepers.org.uk/...
As I mentioned earlier, Accountants and Bookkeepers often work hand in hand. You can see from the above, that particularly as a small Sole Trader, a Level 3 qualified Bookkeeper should fulfil all your accounting needs. On the other hand, it may be that your particular requirements mean that an Accountant is the only realistic option. You can also see that it is possible to use a Bookkeeper for the 'day to day' activities and only refer to an Accountant for the year-end processing (if you are an incorporated business for example). Many Accountants hand off the book management aspect of accounts to a Bookkeeper, while Bookkeepers refer clients who do not fit their qualifications on to an Accountant. Underpinning all this is the matter of cost. I think few would dispute that you can expect to pay more for the services of an Accountant than for those of a Bookkeeper.
My advice is; carefully look at the immediate needs of your business but also take a realistic view of where you think your business will be over the next couple of years. Based on those needs, choose the Accountancy Services Provider (a term used to cover all bookkeeping and accountancy professionals) that best fits those needs. Those needs will, of course, include cost. There is nothing to stop you from changing your Accountancy Services Provider if you find the needs of the business out-grow the services of your current provider. Likewise, if you find you are paying for services that you really don't need, you can always switch to a more appropriate provider.
So hopefully you can now see that to the question "Do I need a Bookkeeper or an Accountant?", the answer is; "It depends!"