People often use "bookkeeping" and "accounting" interchangeably, but they're different jobs. Bookkeeping is recording what happened. Accounting is making sense of it: preparing accounts, applying tax rules and advising on decisions. Understanding the difference helps you decide what to do yourself, what to hand over and what to pay for.
Bookkeeping: recording what happened
Bookkeeping is the day-to-day record of your business's money:
- Sending invoices and recording payments
- Entering supplier bills and paying them
- Recording expenses and receipts
- Keeping the bank account matched to your records
- Running routine reports such as the trial balance and aging
Good bookkeeping is accurate, consistent and up to date. It's methodical rather than complicated, and with software that enforces double-entry bookkeeping, much of it is straightforward.
Accounting: interpreting and reporting
Accounting builds on the records:
- Preparing year-end financial statements
- Year-end adjustments such as depreciation, accruals and prepayments
- Calculating and filing tax returns
- Advising on structure, such as sole trader vs limited company
- Analysing profitability, cash flow and pricing
- Planning for tax and growth
Accountants bring judgment and up-to-date knowledge of tax rules, which change often.
Side by side
| Bookkeeping | Accounting | |
|---|---|---|
| Focus | Recording transactions | Interpreting and reporting |
| Frequency | Daily or weekly | Monthly, quarterly, yearly |
| Output | Accurate ledgers and routine reports | Accounts, tax returns, advice |
| Skills | Accuracy and consistency | Tax knowledge and judgment |
| Who does it | Owner, bookkeeper or software | Accountant |
What you can do yourself
Most small business owners can handle their own bookkeeping, especially with good software:
- Invoice promptly and record payments as they arrive.
- Enter bills and expenses weekly, not in a panic at year end.
- Check your bank balance against your records monthly.
- Review your profit and loss and balance sheet monthly.
When to bring in an accountant
- For year-end accounts and tax returns, unless your affairs are very simple
- When you're deciding whether to incorporate or register for VAT
- When you're hiring your first employee
- When you're raising money or applying for a loan
- When you're unsure how to treat something, which is better to ask before year end than after
When to hire a bookkeeper
If bookkeeping takes more than a few hours a week, keeps slipping, or you'd simply rather spend the time on your business, a bookkeeper can be good value. Clean, current books also make your accountant's year-end work faster and cheaper.
Good bookkeeping makes everything else easier
Whatever you do yourself, the foundation is accurate records in a proper double-entry system. Zelvorm Books is free bookkeeping software that gives you a chart of accounts, invoicing, bills, payments and the reports your accountant will ask for. Posted entries can't be edited, so your history stays trustworthy.
A year in the life: who does what
| When | Bookkeeping | Accounting |
|---|---|---|
| Every week | Invoices, payments, bills, expenses | |
| Every month | Bank check, trial balance, P&L review | Management accounts (if you use them) |
| Every quarter | VAT figures ready | VAT return review and filing |
| Year end | Clean trial balance, aging reports | Adjustments, accounts, tax return |
| Any time | Advice on big decisions |
The better the left column is done, the less time (and money) the right column takes.
A bookkeeping routine that works
Weekly (15–30 minutes)
- Send any invoices for work delivered.
- Record payments that arrived.
- Enter supplier bills and receipts.
- Check who's late paying.
Monthly (30–60 minutes)
- Compare your bank account with your statement.
- Run the trial balance and check for odd balances.
- Review profit and loss and your bank balance together.
- Chase anything over 30 days overdue.
Yearly
- Tidy up receivables and payables.
- List equipment bought during the year.
- Send your accountant the reports and journals they ask for.
Questions to ask a prospective accountant
- Which businesses like mine do you work with?
- What exactly is included in the fee, and what costs extra?
- Which reports and records do you need from me, and when?
- Will you advise on tax planning, or only prepare returns?
- How quickly do you respond to questions during the year?
- Which bookkeeping software are you comfortable working with?
What affects the cost of an accountant
Fees vary widely by location, the complexity of your business and the services you need. The biggest factors are your business structure (sole trader, partnership or company), how many transactions you have, whether you're VAT-registered or have employees, and, crucially, the state of your books. Messy records take longer to sort out, so good bookkeeping is one of the most reliable ways to reduce accountancy fees.
Signs you've outgrown doing it yourself
- Bookkeeping regularly takes more than a few hours a week.
- You're behind by more than a month.
- You've hired staff, started holding stock or registered for VAT.
- You're making decisions without knowing your numbers.
- Year end is a scramble every time.
Any of these is a good moment to bring in a bookkeeper, an accountant, or better software.
The short version
Bookkeeping records transactions; accounting interprets them, prepares accounts and handles tax. Many owners do their own bookkeeping with software and use an accountant for year end, tax and big decisions.
