We often come across business owners who are asking themselves questions like these:
“Do I need an accountant or a bookkeeper?”
“Will my accountant manage my daily transactions?”
“I can't see what’s happening in my business until my end of year accounts are done, when it's too late to make changes.”
It's certainly not surprising that so many owners are confused about the difference. As a result they are not actually getting what they need to help monitor and improve the profitability of their business.
Bookkeeping and Accountancy differ as services in terms of what value they deliver and most importantly they work on different cycles of the business process and financial workflow.
Both help fulfil important regulatory and legal obligations, but also both can and should be helping your business to run more efficiently, profitably and strategically. But many business owners are only getting the first of these two benefits. Part of the problem is the division of services between accountants and bookkeepers, but another part of this is the lack of awareness about how these necessary processes should be working pro-actively for your business. It’s often the case that the business is not getting the full value back from the services they are paying for.
BookCheck has from its inception aimed to tackle this divide and offers a more integrated rounded approach, to deliver greater value for money and greater actionable insights. So let’s look at the two and how they are related.
Bookkeeping is the necessary process of tracking and recording all income and expenditure transactions. It is a necessary foundation of business accountants, but it is not the same thing.
Bookkeeping involves keeping records of payments to and from your business, and summarising those transaction on a daily weekly or monthly basis. A good bookkeeper will be up to date with the exact requirements for documentation and recording against different types of transactions.
Whilst Bookkeeping is about keeping track of factual transactions, Financial Accounting is more a qualitative and regulatory review of a business's financial position, and importantly is usually working to much longer cycles, often aligned to the regulatory periods such as the business tax year, or with specific points in a business growth cycle related to investment, expansion, acquisitions or mergers.
Accountants also have a different and higher level responsibility and level of training and certification than is required by Bookkeepers, due to regulatory and governance requirements related to filing accounts.
An accountant will add value by properly producing the correct financial statements, tax filings and company accountants, as well as optimising tax planning and financial investments in line with the longer term business strategy.
Management Accounting specifically is a type of accounting which provided for the purposes of business management, rather than for regulatory compliance and can be produced over any timescale. Combining Bookkeeping with Management Accounts specifically is a powerful tool and brings strategic benefits above and beyond the statutory requirements of filing annual company accounts and tax filings.
BookCheck has from the beginning built a team of both bookkeepers AND qualified accountants to solve the problem faced by many business owners both large and small.
Any Bookkeeper will by legal necessity record and track your transactions, but for a living, organic business bookkeeping and can do so much more than that. By accurate and strategic analysis of these figures on an ongoing basis, valuable management reports should be produced to enable you to make strategic or tactical decisions accurately, and to safeguard against risks to the business’s financial position.
BookCheck’s bookkeeping services fulfil the following necessary requirements:
- Recording financial transactions
- Producing invoices
- Maintaining ledgers and accounts
- Payroll processing
But alongside this, our monthly Management Accounting reports deliver these important insights:
- Monthly profit-and-loss with balance sheet
- Gross margin - split any way that is valuable
- Graphs and charts to better visualise the underlying data
- Budget reporting with variances
- Comparison with previous years reporting
- And custom reports unique to your business
With the fast pace of modern business and instant online trading with suppliers and customers, and with an ever more complex set of record keeping and regulatory obligations, these reports are vital to a business transparency and visibility over things such as cash flow positions, exposure to risk and profitability of different aspects of the business.
Our combined approach avoids the chasm that often exists between the two services and this ‘bridge’ delivers a valuable picture of what's really going on with your business as a financial vehicle, how operational matters are related to financial outcomes in near real time and delivers clarity that really helps your business to manage and grow its profitability, to reduce its risk, and move forward strategically with good financial health.
With the advent of sophisticated bookkeeping and financial transaction software, and latterly cloud based bookkeeping tools such as SAGE ONE and XERO, Bookkeeping has moved closer to traditional accountancy and this powerful software can be used to generate much of the tax filings and reports traditionally part of the accounting process. Equally this software has enabled new ways to speed up the extraction of valuable insights from the bookkeeping process. And yet many business are not in a position to take advantage of this, and many service providers have not developed the processes to deliver this value.
Our entire focus is on using these enabling technologies together with integrated bookkeeping and management accounting to put financial data insights at the heart of our client’s business operations on a day to day basis.
Try our Bookkeeping Healthcheck or read more about about our combined ‘Bookkeeping with Management Accounts’ service and our BookCheck Advanced Reporting service, or if you want to discuss how we can make them work for your business then please contact us on 01234 567890 or email@example.com.