The most common misconception about accountants is

The most common misconception about accountants' work 

The most common misconception about accountants is what exactly their role is and the level and quality of their work. It is a common perception that accountants in their capacity as bookkeepers will books your sales and purchases invoices either on excel or a software and pay your taxes when necessary. Hence, they should be remunerated just for that! 

That is utterly wrong! 

 

The work of a professional accountant performing bookkeeping 

A professional accountant performing your bookkeeping not only books your sales and purchases in a licensed software but also your bank account and payroll in such a manner that they reconcile. By reconcile we mean that your books (accounting entries) agree with the bank account, payroll creditor at any given month and most importantly comply with local laws and regulations. 

Sounds easier than it actually is. With more than 20 years in the field bookkeeping is a complex and demanding task. A task that certainly not anyone can do.  

Having said all of the above some may still argue that having the books fully reconciled is not the job of the “simple” bookkeeper but of the auditor of the company. This is absolutely wrong. It is as wrong as using the term “simple” bookkeeper. The accountant or the bookkeeper either process all the accounting information correctly or it does not perform its function correctly. 

 

What happens if I need part time help by a nonprofessional accountant 

By all means, you can receive help by anyone that suits your needs. However, bookkeeping and complying with payroll legislation and corporation tax laws is complicated so do not expect that this part time assistance will cover these needs. Similarly, do not expect that a non-accountant or a non-professional bookkeeper* will be able to produce fully reconciled accounts that accurately present the position of your business. 

 

So what's the output delivered by a professional bookkeeper? 

Think of it like this. A professional bookkeeper should produce accounting records (Trial Balance and Detailed Ledger) that can be used by the auditor who will conduct their job with minimum adjustments. This implies that the auditor will validate the accounting booking of the bookkeeper without finding any issues. 

 

This can be achieved if the below are always performed: 

• Bank account per books is fully reconciled with the accounting records 
• Creditors per books are reconciled with the supplier statements 
• Debtors are repaid post year end or written off during the year 
• Payroll is recorded in a payroll software which ensures employers and employees deductions are correctly calculated and paid each month 
• Accruals such as Decembers bills, audit and accounting fees are booked 
• Agreements are reflected in the accounting entries 
• Prior year auditor’s entries are booked in the accounts 
• Year-end trial balance and detailed ledger are fully reconciled, reflect the reality of the business and ready to be handed over to the auditors. 

 

Does it really matter if the accounting work is not up to such level? 

Absolutely yes! 

Not only you as a business owner will not be able to know at any given time the financial performance and position of your business and cash flow but you will create an unnecessary accounting workload to your auditors who will have to perform all the functions the bookkeeper has not performed and off course charge you extra. 

In addition, it is very likely that you will encounter new tax obligations which you have not been familiar with due to your bookkeeper’s omissions. Such taxes usually are vat liabilities and payroll liabilities due to wrong processing or non-compliance with new legislation. 

So is it really worth it saving that marginal fee each month? I believe not! 

 

I am confused! What is the difference between an accountant and bookkeeper? 

A bookkeeper is a person who does not belong in a professional body of chartered or certified accountants (ICAEW or ACCA) and can perform rudimentary tasks such as the processing of the accounting records, payroll and basic compliance at the record keeping entry level. 

On the other hand, an accountant can be a person who belongs to a professional association such as the ICAEW or the ACCA and as a result can be also an auditor and a tax consultant. Given their higher level of education and experience could also provide bookkeeping services however this is uncommon. 

In a nutshell a bookkeeper cannot be something more than a person processing the invoices, bank and the payroll functions whilst a professional accountant could perform the entire compliance function of a Company from bookkeeping to statutory audit. 

 

Conclusion 

Choosing a good bookkeeper is difficult simply because it is very difficult to assess their understanding especially if you are not an accountant. It is strongly advised to receive accounting services from licensed, regulated firms which will ensure not only compliance with latest laws and regulations but also high-quality work which will make the work of the external auditors easier and as a result cheaper.  

Choosing a professional accountant will also safeguard you against statutory liabilities and taxes which can destroy your business if not accounted for correctly in a timely manner.