Do you know the difference between Bookkeeping, Accounting, and Payroll? Knowing how these services differ will help you choose wisely and get value for money.
Bookkeeping
Bookkeeping is primarily concerned with the accurate recording of financial transactions.
A bookkeeper will normally use an Excel spreadsheet or accounting software such as Sage, Xero, or Quickbooks, for example, to ensure that your sales, purchases, banking, payroll, pension and tax records provide a true reflection of your business activities for each financial year.
Typical bookkeeping tasks include –
- Processing purchase invoices
- Processing expenses claims
- Issuing sales invoices
- Reconciling bank accounts
- Preparing and filing VAT returns
Accounting
Accounting is the process of interpreting, summarising and reporting financial data.
An accountant will analyse your bookkeeping records to ensure their accuracy and compliance with the law, for example. S/he will prepare and file tax returns on your behalf and provide reports and financial advice to help you make sound business decisions.
Typical accounting tasks include –
- Preparation of management reports (information on sales, overheads, cashflow, profitability, etc.)
- Preparation and filing of statutory reports (tax returns, income statements, balance sheets, etc.)
- Tax planning and other advisory services.
Payroll
Payroll refers literally to the list of employees paid by a business. However, the term is normally used to describe the process of calculating employees’ gross salaries, making statutory and non-statutory deductions, and paying the net salaries accordingly. Recent developments in Taxation and Employment Law (such as RTI and Auto Enrolment, for example ), and the need for specialist software, has raised the skill level required to run a payroll successfully.
Typical payroll tasks include –
- Calculate weekly/monthly salary for each employee
- Deduct PAYE Tax and National Insurance Contributions
- Report employee pay details to HMRC (RTI)
- Assess each employee’s eligibility for the Workplace Pension Scheme and enrol/opt out as necessary (Auto Enrolment)
- Calculate Employee and Employer Pension Contributions and pay them to the Pension Provider.
- Pay employees’ net salaries
- Update the bookkeeping records accordingly
Do you know the difference between Bookkeeping, Accounting, and Payroll?
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“As a small business it is important to always have financial clarity and often it is difficult to try and do this yourself. Paul has worked with us for several years and has streamlined and organised all of our accounting systems. He provides us with a complete accountancy service and is very professional in his approach as well as being a likeable guy.” - D. Walsh, Director. DualTEC Services Limited, Keighley. (Google review)
“Paul has done a great job putting my accounts on to Sage Business Cloud, and also got a discount for me. I like that the software is MTD compatible and I can access it from anywhere. Paul sorts out all my invoices, does my bookkeeping and produces reports every quarter (or whenever I need them). He is friendly, reliable and easy to work with - it's good to have him on board." - C. Milne, Proprietor. CAM Properties, Carnforth. (Google review)
