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 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 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 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? As an AAT qualified accountant I am able to provide bespoke solutions for business owners. If you wish to ask questions or discuss your requirements please telephone me on 07966 421381 or drop me an email via my Contact Page.
© 2021 Paul J Lockey