Differences between Accountants and Bookkeepers
In this article we will explore the difference between an accountant and a bookkeeper. Know which one you are looking for and what each can contribute to your business. Let’s jump right into it:
Protected Terms in The United Kingdom
A protected term in the United Kingdom is a term that may legally only be used by professionals with relevant experience and qualifications. In the UK, the terms accountant and bookkeeper are not protected terms. Therefore, it is up to you as a consumer to ensure that your accountant or bookkeeper has the qualifications and experience you are looking for.
Accountants can be an in-house employee or the accounting duties can be outsourced to UK based companies. Let’s take a deep dive into what an accountant is and what accountants do.
What Does an Accountant Do?
An accountant, otherwise known as a chartered accountant, is responsible for providing trustworthy and sound advice to business owners and individuals about their financial well being. Some of the day to day duties of an accountant are listed below:
- Audit accounts
- Detailed Financial reporting
- Detailed Financial Analysis (Examples: Actual vs Budget, Actual vs Forecast or like for like period analysis)
- Tax planning and advising
- Financial Risk Assessment
- Business Recovery and Insolvency
- Manage accounting systems and processes
Note that this is a basic overview of some of the functions that an Accountant can perform. However, some accountants may have additional experience and qualifications. This may expand their capabilities and expertise to other areas in addition to accounting.
Furthermore, there are a few different types of accountants.
Types of Accountants
In the UK accountancy can be subdivided into four different sectors:
- Corporate Accounting
In corporate accounting the accountant’s main function is to keep the business financials up to date and in line with current legislation. This financial data is most often used for external reporting as well as tax compliance. A corporate accountant’s duties may also include an in-depth analysis of the financials and advising corporates to make informed decisions.
Public accountants work with external clients. This can include individuals, corporations or small companies. In essence, any agency that takes on accounting clients can be considered a public accountant. Due to having a wide variety of clients, public accountants are usually flexible and are up-to-date with all current legislation regardless of whether they are working with individuals, small businesses or corporations.
- Government Accounting
Accountants employed in the UK government work within the different governmental spheres namely local, state, or federal government agencies. Governmental accountants usually have a higher vetting process due to the nature of the data that they work with. Some governmental data may be confidential.
- Forensic accounting
Forensic accountants can be seen as the investigators of the financial sector. Their main duties are to collect, recover, and reconstruct financial data when it is difficult or impossible to obtain. Forensic accountants can work within the corporate, public or governmental spheres to assist in identifying commercial crimes like fraud, corruption and money laundering.
What Qualifications Does an Accountant have?
As previously mentioned, the term accountant is not a protected term. So how do you know whether your accountant is certified and capable of their duties?
Check their membership with regulatory bodies such as:
- Association of Chartered Certified Accountants (ACCA)
- Chartered Accountants Ireland (CAI)
- Chartered Institute of Management Accountants (CIMA)
- Chartered Institute of Public Finance and Accountancy (CIPFA)
- Institute of Chartered Accountants in England and Wales (ICAEW)
- Institute of Chartered Accountants of Scotland (ICAS)
It is not a requirement to belong to a regulatory body in order to practise as an accountant in the UK. However, it is strongly advised that you ask about an accountant’s membership with any one of the UK’s regulatory boards.
Most of the regulatory boards have requirements for qualifications and experience to register with them. The goal is to uphold industry standards.
Bookkeepers are usually employed in-house providing accurate, up-to-date financial information about a business.
What Does a Bookkeeper Do?
They are hands-on when it comes to the day to day affairs of the business. Some of their daily duties include:
- Recording financial transactions
- Handling accounts payable and receivable
- Completing tax forms
- Handling client invoices by recording and approving or denying the payments
- Appropriately coding payables to prepare them for the accountant’s input later
- Distributing money appropriately to various departments within the company
- Invoicing deliveries and paying vendors for their goods and services
- Maintaining office supplies by keeping an inventory and ordering new supplies as needed
- Monitoring debt levels and ensuring compliance with debt covenants
- Recording cash receipts and handling bank deposits
- Maintaining petty cash
- Preparing information for auditors
- Keeping an annual company budget
- Preparing purchase orders in accordance with requests for materials
- Handling subsidiary accounts
- Filing historical records and retrieving necessary documents as needed for others
- Managing profit and loss statements and balance sheets
- Paying regular bills for the company
- Maintaining company ledgers
- Researching and complying with federal, state, and local requirements as they pertain to the company’s operations and financial activities
All of these duties are expected from a bookkeeper, however, companies may require a bookkeeper to have additional administrative functions in the business.
What Qualifications Does a Bookkeeper have?
Bookkeepers are not required by law to have a professional qualification. However, a good indication of a bookkeeper’s expertise is their membership with regulatory bodies such as:
- The Association of Accounting Technicians (AAT)
- Institute of Chartered Bookkeepers (ICB)
Accountant vs. Bookkeeper
Bookkeepers are hands-on in creating financial statements and handling the day-to-day activities of the business. It is their duty to ensure that all financial statements are organised and ready for any external reporting like taxation.
However, an accountant has a more in-depth view of the business’ financial well-being. An accountant is able to create detailed reports and analysis on where the business is doing well, where it can do better and identify financial risks moving forward. Furthermore, accountants can offer valuable insight into financial forecasts and comparing fiscal year records to identify areas for improvement within the company.
Can a Bookkeeper be an Accountant
Technically speaking, a bookkeeper cannot be an accountant, but an accountant can perform the duties of a bookkeeper. Imagine a bookkeeper as being the first step toward being an accountant. Being an accountant you need to have a thorough grasp of all the functions of a bookkeeper, however, as an accountant you take it one step further to do in depth analysis.
Now that you have this information, you can go out there and make an informed decision on whether you are currently looking for an accountant or a bookkeeper.
If you are looking for a UK based accountancy firm, you can contact CIGMA accounting for all your accounting needs