Accountants can do so much for a business, from organising invoices to analysis of complex financial data, and help guide its owners in making choices.
Of all the tasks that an accountant completes, bookkeeping is often seen as among the most basic.
Don’t be fooled, though—bookkeeping services can keep a business from drowning in unsorted information and untracked transactions.
What is bookkeeping?
Bookkeeping is the continuous day-to-day work of an accountant or bookkeeper. It involves keeping track of the financial activities of a business and organising the various strands of these data, such as invoices and records of payments.
Bookkeepers do vital work for businesses, but they can be just as helpful for charities and non-profits as well as individuals like sole traders.
Not all of the information they record is ‘vital’, in the sense that much of it may never need to go to HMRC or serve as proof of anything, but it’s still important for the respective business entity nevertheless.
The main strength of bookkeeping services is that they yield organised data that can be referred back to by the business that needs it. This keeps owners informed and well-evidenced in case of any disputes that might arise with banks, suppliers or customers.
It also empowers the business to understand a more precise reading of profits and losses, something that can be particularly useful for sole traders who are singularly responsible for business.
Bookkeeping is something that can be done by anybody, in theory—you don’t need a special qualification to do it for yourself, and you may elect to do just that if you’re starting out small or just testing the waters with your new business.
However, if business begins to take off and the number of payments going in and out increases, finding somebody who knows their way around the books may become all but essential.
What does a bookkeeper do?
A bookkeeper will have plenty to keep themselves busy with, provided you have a steady stream of business generating income and expenditure.
Some of these tasks might include:
Recording financial data
Bookkeepers can be said to keep their fingers on a business’s pulse. They keep track of finances on the daily, ensuring data is as up-to-date as possible and continually kept accurate. This means that managers and business leaders aren’t left waiting to make quick, informed decisions that could affect the business financially.
This financial data will include assets and liabilities, as well as any equity and expenses if the business is large and profitable enough. In order to ensure this information is truly accurate, the bookkeeper may carry out bank reconciliation. This means comparing their figures to other sources of information like bank statements and accounts to ensure that the calculations marry up correctly.
As well as recording the actual financial activity between customers and suppliers, your bookkeeper or accountant might also generate invoices and see that they’re sent to the right people. Invoices can often get lost in inboxes and busy diaries—or, worse, simply ignored—so handling invoices will likely mean chasing plenty to see them completed.
Invoicing is an aspect of bookkeeping and accounting that can easily become overwhelming, especially and chiefly for businesses that process a lot of individual sales on a day-to-day basis. An unpaid invoice can slip through the cracks and end up causing confusion and unbalanced books months down the line, where it’s harder to trace the gaps back to their sources.
Dedicated bookkeeping keeps the invoicing process more watertight.
The reports produced by bookkeepers consolidate various pieces of financial data for at-a-glance understanding. They’re ideal for leaders and stakeholders who need to get the facts about how a business is performing financially.
These reports can be produced quite quickly with up-to-date information and bookkeeping software.
These tasks and many more can be handled by either a bookkeeper or an accountant.
The key difference between the two revolves around how much analysis goes into the financial information versus its procurement and organisation. Accounting can be seen as a ‘deeper’ role than bookkeeping business, with accountants capable of analysing financial data and harnessing it in more complex ways in order to reduce tax and make profitability forecasts.
Bookkeepers can still help with matters such as tax preparation to various degrees, but obligations to HMRC, like end of year accounts, are best handled by an accountant.
Why do you need a bookkeeper?
Bookkeepers handle tasks that can appear highly complex for the inexperienced, particularly because so many obligations of running a business must comply with several pieces of legislation all at once.
For example, if you employ people to work in your business, you need to ensure that you’re paying them what they’re owed on time. Not just to oblige the legalities of their contracts with you, the business, but also to do your moral duty as a trustworthy employer.
Meanwhile, you have invoices to pay, invoices to others that need chasing, and records of these transactions needing to be made every step of the way.
This is essentially why so many businesses make use of an experienced and knowledgeable bookkeeper. The various financial tasks that they handle takes a huge weight off a business’s shoulders, particularly for larger companies who have business accounts to manage and expense claims to pay (and then later process in regards to tax).
A company that needs these things done likely can’t spare anybody to handle them alongside their usual role, thus the need for a dedicated bookkeeper who can dedicate their full time to doing them accurately and in good time.
Do bookkeepers need a licence to operate in the UK?
You can do your own bookkeeping without a license or special requirement, as part of conducting your own business (non-commercial basis, in that you earn no money directly for conducting the bookkeeping).
While this might be ill-advised for individuals who have no knowledge or experience in the practice, there’s no legal barrier preventing you from trying.
However, if you want to provide bookkeeping UK-based services to others, you need to register so that your activities aren’t in breach of the law. There are regulations that apply to certain roles working in the financial sector.
While bookkeepers aren’t explicitly one of these, accountants are—and bookkeepers are classed as Accountancy Service Providers. This means that even a self-employed individual who only provides bookkeeping in Manchester must register with HMRC (unless registered with a one of a specific number of supervisory bodies).
Money Laundering Regulations ensure that bookkeeping is a regulated profession, and for good reason. Bookkeepers are in a prime position to obfuscate the true source of any assets obtained through criminal means.
Being registered with a supervisory body appointed by HM Treasury means you will be monitored, and you need to have systems in place to correctly identify money laundering practices and report them to the appropriate authority.
Bookkeepers who are employed by a business don’t need to pursue registration—this only applies to self-employed individuals.
How much do bookkeepers charge?
How much you end up paying for bookkeeping depends on the services you need and whether your chosen bookkeeper charges a flat fee or an hourly rate.
Rates for a self-employed freelancer usually fall around £20-30 per hour, and since general pricing for labour is set in this format, you’re most likely to find bookkeepers give you their fees as an hourly rate.
A flat rate might be given as a monthly cost ranging from £2,000 to £3,000 per month, or it could be an annual subscription-based fee.
Rates can vary as much as the bookkeepers setting them. When negotiating or shopping around for fees, it’s best to familiarise yourself with the kind of salary ranges that bookkeepers work within and be prepared to pay a proportionate fee accordingly.
As with many professional services, bookkeepers situated in London will likely cost more than a bookkeeper in Manchester or Salford, so give some thought to the location of your business and your chosen bookkeeping services.
Do I need a bookkeeper or an accountant?
The answer to whose services you need depends on what actual services your business demands.
If you’re a sole trader in need of somebody to help you out with invoices and tax, then either a bookkeeper or accountant will be equally as helpful and valid. Some might see an accountant as overkill for such a role, but either is a fine choice.
The same goes for SMEs looking for the payroll, monthly reports, and data entry tasks that come with employing staff and paying salaries as part of monthly outgoings.
However, if you need extra help like management accounts, corporation tax, and other additional services, then you need an accountant’s help.
Given the training and experience behind many accountants—particularly accountants who have gained chartered status—you’ll likely find an accountant to be more expensive than a bookkeeper, so weigh up the difference between what you’d like to have versus what you definitely need.
Can a bookkeeper save money?
Despite the cost of paying a bookkeeper, whether that’s somebody employed in-house or a freelancer, using their services can ultimately increase profitability.
Unpaid invoices can easily get lost in the day-to-day of a company, particularly when there isn’t anybody strictly dedicated to monitoring invoicing. By having a bookkeeper who keeps their eye trained on all invoicing, you can ensure that every bit of due income is caught.
Carrying out bank reconciliation also ensures that mistaken numbers don’t lead a business to misunderstand their profits, preventing ‘losses’ through data entry mistakes.
Whilst not a skill that bookkeepers strictly need for their jobs, some may undertake extra training and qualifications to enable them to help with matters such as business strategy and financial guidance on a deeper level.
These can help businesses in putting their best foot forwards—particularly useful for start-ups, where the early days are among the most critical to success—as well as helping businesses strategise for potential challenges and plan safety nets for likely pitfalls.
Having an expert in finances is a massive strength when you’re trying to brace through harder times and get a business onto the path of greater profitability.
How can I get bookkeeping services in Manchester?
If you need tried-and-true bookkeeping services, look no further than MCC Accountants. Our experts are all fully qualified and highly experienced, ready to help you with all matters involved in payroll, tax, invoicing, and much more.
To find out more about what we can do for businesses like yours, contact us today.