Archive for October, 2009

Do I Need a Bookkeeper or an Accountant?

Monday, October 19th, 2009

Small businesses often ask, “Do I need an accountant or a bookkeeper?”. The answer is normally, “both”.

Accountants & Bookkeepers have some overlap in what they do… they both might do the payroll, they both might do the VAT returns… but then the accountant does higher level activities than a bookkeeper. I always compare it to a Doctor and a Nurse. A nurse can do a lot of what the doctor does… but a doctor (like an accountant) is more qualified.

But bookkeepers and accountants, essentially do different things and have very different roles to play in helping businesses to manage their finances properly.

Bookkeepers charge far less for their time. Far less. That’s is a principle difference between a bookkeeper and an accountant. Therefore, it makes sense to get a bookkeeper to do as much of your work as they can. Bookkeepers record the financial transactions of a business and present them in a neat and orderly format – which could be on accounting software such as Sage, Quickbooks, MYOB, MyCake or on a spreadsheet. This information is then used to complete the VAT figures.

Bookkeepers tend to work on-site, with their sleeves rolled up and as a result, they’ll spend more time with your business and really get to know how it ticks. They are more down to earth, and tend not to speak in jargon, and so can tell you plainly – what the figures say.

Some will take over the task of credit control – chasing customers for payment. It is always better to have a different person trying to sell a service, from the person collecting money.

Accountants do not normally want to provide an ON SITE bookkeeping service. What they do best is to take the figures from the bookkeeper and then complete the year-end accounts and other formalities. They will advise you on exciting things like ‘succession planning’ and ‘exit routes’ and how to ‘save on tax’.

The best advice, as in most other matters, is to make sure that you use the correct person for the job. Both bookkeeper and accountant should be qualified and be up to date in best practice in their respective professions so that you can rest assured knowing that your business is in safe hands.

Above all, make sure your bookkeeper and accountant talk to each other and get on with each other. They should be in agreement over the best accounting system for your business.

Getting it right from the offset will mean that you have regular information about your business that you understand from your bookkeeper and reduced annual fees from your accountant. So the question should not be “Do I need an accountant or a bookkeeper?” but rather “Have I got the best bookkeeper and best accountant for my business?”

Staying In The Game of Business

Wednesday, October 7th, 2009

I had a call from a client last week. Unfortunately, he’d had to put his business into administration, and was starting again…so was ringing me to explain the situation. A few of his clients had gone bust on him – but one in particular owed him almost £10,000, and that had left him in an impossible situation. I asked him – what 3 things have you learned from this experience.  His answers were:

1. Just because someone is ‘posh’ doesn’t mean they’ll pay you. So don’t just accept people at face value. Get payment up front wherever you can.

2. Don’t spend the VAT money. Put it away into a separate account. (Our bookkeeper used to tell him this, but he didn’t listen).

3. Don’t take too much money out the business. There’ll be nothing left.  (Another thing our bookkeeper warned him about).

Sometimes, you might be accustomed to a lifestyle… but in business, if things aren’t going so well, you need to either a) adjust your lifestyle or b) improve the business because, there isn’t a bottomless pit. And the definition of insolvency is: ‘Unable to pay your debts as they fall due.’

Fortunately, for us, he was on our standing order scheme, and our bookkeeper always made sure our bill was a priority…  and he’s a decent bloke. But who has gone bust leaving you with bills you now can no longer meet? This is the knock-on effect of the credit crunch.