What does a bookkeeper do?

A bookkeeper’s job is to record the financial data of a company or organisation accurately and transparently, to ensure the business owner has real time information regarding the financial status of the business, but also to ensure that the company’s accountant has correct and timely information to prepare the legally required management accounts for the company.

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What’s the difference between a bookkeeper and an accountant? Do I need both?

Bookkeeping is one part of the whole accounting system. Accounting starts where bookkeeping ends and has a broader scope. You don’t need to have a bookkeeper by law, but if you’re a limited company, you must have an accountant to prepare your management accounts. Having both may save you time and money in the long run because bookkeepers know how the data needs to be presented to your accountant, and will ensure everything is recorded correctly.

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I’m a sole trader. Can I have a bookkeeper?

Anyone can have a bookkeeper. Some clients I work for were frustrated that they were spending more time doing their accounts and admin than running their business. Some knew from the start they didn’t want to be spending time on their accounts - they wanted to put all their energies into the reason they started their business. The key question to consider is this - if you don’t have the time or inclination to keep your accounts up to date, then who will? It’s also worth bearing in mind that accountants charge a great deal more than bookkeepers, so even employing the services of a bookkeeper for a couple of hours a month could save you money.

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How do I find a bookkeeper?

The first thing I recommend is to ask other business owners and accountants who they use. Most contacts I get from potential new clients come via people I work with already. Word of mouth is the most valuable marketing tool there is. LinkedIn can also be useful, and social media generally, of course. There are also organisations like the Institute of Certified Bookkeepers, plus other skills websites like People Per Hour. A word of warning about websites like Freelancer though. Many of the people on there aren’t based in the UK, and although they quote cheaply and say that they understand our tax system, in my experience (based on clients I have worked with) they don't and it may cost the business more to resolve mistakes in the long term. There are not-great bookkeepers as much as there are not-great other occupations, so make sure you do your research.

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How much should I expect to pay a bookkeeper?

You’re probably looking at a minimum of £20-£40 an hour for ongoing bookkeeping help. This will depend on a number of factors, including geographical location, length of experience, whether a bookkeeper is qualified, what services you require and so on. Bookkeepers can charge what they want, there is no industry standard. If you think it’s too expensive do remember that to a lot of businesses, the work of their bookkeeper is utterly invaluable and worth every penny they pay them. One thing I find useful with new clients is to ask how much they have budgeted for bookkeeping and then they can always cap the number of hours I undertake for them. The work may take longer, but it will get done eventually. With a lot of my clients, once I get to know what’s involved with their accounts, I set a fixed fee and hours with them, which helps both of us budget resources and time. Be aware though that if you have delayed doing any financial admin until just before a big deadline and the bookkeeper has to prioritise the work, you should definitely expect to pay more, as the bookkeeper may have to put other work on hold to get your work done and save you incurring penalties. It’s also worth bearing in mind that accountants charge a LOT more - usually around £125- £250 an hour (often plus VAT), so a competent bookkeeper can be incredibly good value.

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Can a bookkeeper do VAT and tax returns?

It depends on the bookkeeper. I do VAT returns for clients but I don’t do tax returns, either self assessment (SA) or corporation tax (CT), for anyone other than myself. I pride myself that I record the data in such a clear and transparent way that completing your own SA, or asking an accountant to do it, is very straightforward. Some bookkeepers are accountants as well and you will pay more for them as they do everything. If you’re not sure, ask.

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What are anti money laundering (AML) checks and why do they have to be done?

AML regulations were brought in (in their present form) in 2007 and have been updated a few times since. The regulations require anyone working in financial services (including estate agents, accountants, bookkeepers, bookmakers, solicitors etc) to have checks in place to ensure their clients are not involved in activities which would constitute money laundering. For my part, that means that before I do any work for you, you have to send me forms of ID, which I use to run checks on you and your company, to ensure there are no red flags. I use a company called Veriphy to process these checks, for which I am charged. I am supervised by HMRC (all bookkeepers have to be registered with and supervised by an approved body, the HMRC is just one of those bodies) which means they can audit my adherence to the AML regulations at any time, and again, I pay an annual charge for this oversight of my work. AML regulations also mean that if I see anything in your accounts that may constitute money laundering, I am legally obliged to report it and cannot tell you. I am required to have an AML policy and risk assessment and to carry out regular training that ensures I understand and am competent in spotting money laundering. You can find out more details about AML here.

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What is Making Tax Digital (MTD)?

HMRC is changing the admin of the tax system by introducing Making Tax Digital (MTD). As the name implies, MTD will require all records to be digitised and if you are VAT registered, you will already be familiar with MTD and submitting quarterly returns. Over the coming years, MTD will expand to all businesses, whether VAT registered or not, including the self-employed and sole traders, and eventually HMRC will require all businesses to submit their self assessment, VAT and corporation tax returns using approved accountancy software up to four times a year. More information is available from HMRC.

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Do I have to use accountancy software?

If you are VAT registered, you are already legally required to submit your VAT returns using approved software (such as Xero or QuickBooks, but there are many others) in accordance with Making Tax Digital (MTD). Over the coming years, MTD will expand to all businesses, including the self-employed and sole traders, and therefore the sooner you get your accounts onto software, the better for you and your business. Having your own software makes the job very quick and easy, assuming all the transactions have been entered correctly. Most accountancy software is now cloud-based, with a monthly fee depending on what your business needs. Prices start at a few pounds for the simplest business, rising up to around £30-40 for a business that, for example, requires multi currency information. Most cloud-based accounts packages also have access to add-on software, such as payment providers (PayPal, Square, Stripe etc), inventory, stock management, credit control, CRMs and cashflow. You will have to pay for some of them but not the integrations of bank accounts and payment providers.

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Can bookkeepers give tax advice?

Bookkeepers tend not to advise on tax, as it’s not generally part of their remit. That may be different if your bookkeeper is also an accountant, which I’m not. I always refer clients to their accountant when it comes to tax matters, whether personal or company. Accountants are qualified to advise about tax and are obliged to keep up their CPD as regards tax, as well as other legal financials.

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Do I need a business bank account?

Limited companies are legally required to have a business account. If you're a sole trader you are not legally required to have one. However, there are instances where a bank, suspecting that someone is using a personal account for business transactions, has frozen that account for further investigation. It's also worth bearing in mind that should your business ever be audited by HMRC, and you are using a personal account for business transactions, you will have to give them access to your personal bank account too, so my advice would always be to get a business account and keep everything separate.

 

Most high street banks charge fees on their business accounts. Some banks will offer a free business account for a limited period, some include perks which may be useful to your business like card readers, and some offer permanently free options (look at the newer challenger banks for these). You may still have to pay for some functions like paying cash in or foreign currency exchange. 

 

Before you apply for a business account, do your research for the best account for your business, including talking directly to the banks if needed. What facilities are you going to need? How will you pay cash in? Will you take a lot of foreign currency payments? Will you travel a lot so need favourable exchange rates when abroad? Do you need a card reader? If you need start-up capital, you may be limited by which banks will lend you money, and any loans will be contingent on you opening a business bank account with them. Getting the right bank account at the start saves a lot of time (and sometimes money) further down the line.

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I receive invoice payments in foreign currencies. Can I have a foreign currency account?

Yes. Some banks, like HSBC, Metro Bank and Starling, are good at providing foreign currency accounts, others are less helpful. You may have to attain a certain level of business before you qualify for one though. And more than likely they will come with fees. You will have to pay currency exchange fees for moving money, but it's likely to be competitive versus receiving a foreign currency payment into a GBP account, and you have more control over when you move the money which may allow time to wait for more favourable rates. There are other ways around the issue if you can't get a foreign currency account, or you need a more niche currency account, and that's by using a currency trader like Moneycorp, XE, Wise - there are loads - but again, do your research into how much they charge, how it works and how easy their systems are to access. They are likely to be more expensive than a bank account but may save you money and time in the long run, especially if you only do a small amount of foreign business.

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