Save content
Have you found this content useful? Use the button above to save it to your profile.
AIA

Are accountants more than bookkeepers?

by
25th Mar 2013
Save content
Have you found this content useful? Use the button above to save it to your profile.

Sadly the public are often unaware of the differences between accountants and bookkeepers. Beyond this they are unaware that accountants may or may not be qualified and members of one or more of a myriad of professional bodies, explains Mark Lee.

But let’s focus on the bookkeeping side of things for now. It’s a branch of accountancy and one that, in my day, you certainly had to master as part of your accountancy training. I hope that’s still the case!

There has always been scope for those who enjoy bookkeeping to focus exclusively on this area of activity. And that includes those who have not undertaken full-scale training in accountancy. There are independent bookkeepers, those who are employed by accountancy firms and those who work within larger more entrepreneurial bookkeeping practices.

When a client’s bookkeeping is in a mess some accountants will simply sort out the bookkeeping themselves. Others will recommend a third party bookkeeper or an in-house colleague.

In most cases the fees available for bookkeeping work are lower than those for other accountancy services. I suspect that there are still plenty of accountants around who fail to distinguish this difference in value. If I’m right then either they are trying to charge too much for bookkeeping work, or, more commonly I suspect, they are under-valuing the accounting, tax and advisory work they perform.

There are plenty of consultants around who advise accountants to charge more for valuable accounting and advisory services. Each to their own. Recently however I became aware of a new (to the UK) service that is focused on helping bookkeepers to build successful practices. This is not something I have seen before and I wonder what the impact will be on accountants?

Pure Bookkeeping has already helped more than 300 bookkeepers in Australia to become more successful. Their approach seems quite revolutionary. It involves a simple licence system that enables bookkeepers to build their practices by adopting best practice systems and processes. It occurs to me that it could also be adopted by start-up accountancy practices. Indeed I suspect it may sometimes be easier to win bookkeeping work than full-on accountancy and tax work when you first set-up in practice.

The approach and business model that Pure Bookkeeping promotes is one that would work equally well for start-up and struggling accountancy practices. Indeed their common sense approach highlights the four stages involved in building your practice (be it focused on bookkeeping alone or on accountancy services too):

1.       Start-up – you are limited as to the profits you can make while you have no leverage. You may be part-time and probably under-charge and operate without systems in place. Systems can help you both as regards the quality of the service you provide and the marketing of your service offering. Start-ups tend to focus on getting more clients and do this with no support staff or anyone to whom you can delegate work

2.       Successful practice – you are probably still the only one doing the work but you are earning decent fees and making a fair profit while working 30-40 hours a week; Mark Hodgson of Pure Bookkeeping suggests that a benchmark profit for such a bookkeeping practice is £40-£50,000. I wonder how this stacks up against similarly structured accountancy practices. In theory they should be earning much more than this without working all hours (or weekends)

3.       Transitioning to a business – it’s not for everyone of course. But if you want to make more profits you need to be able to justify premium fees and to achieve some leverage by employing bookkeepers or junior accountants to do some of the work. When you do this there may be an initial drop in the profitability of your practice as you introduce more systems and your admin costs rise. Life can be easier if you have good systems in place. These can help keep the training and learning time to a minimum. And of course you need to know how to engage capable and competent staff. Too often we hear of ‘hire and pray’ approaches to recruitment that only work out if you are really lucky

4.       Successful business – How many staff do you need to have to be able to make enough profit to warrant the time, effort and energy absorbed by recruitment and management? Mark Hodgson suggests that a bookkeeping business would need to have at least five bookkeepers working for the owner and that this should enable the practice to generate an annual turnover of £150k to £500k. The owner would then be making £75k to £200k profit before tax. Again, I wonder how many accountancy practices can achieve this level of turnover and profitability?

I would welcome feedback as to how this analysis compares with readers’ ambitions for and experience of their start-up accountancy practices. Also what proportion of your initial client work requires you to perform bookkeeping services? Do you do it yourself or do you refer it to a bookkeeper? A reciprocal relationship could be in everyone’s interest.

Mark Lee is consultant practice editor of AccountingWEB and writes the BookMarkLee blog. This is for accountants who want to overcome the boring stereotype and to be more successful in practice, online and in life. He is also chairman of the Tax Advice Network of independent tax experts. 

Replies (26)

Please login or register to join the discussion.

Stuart Walker Yellow Tomato Copy
By winton50
25th Mar 2013 22:00

Is this an 'advertorial?

It reads like you've just transcribed their press release

Thanks (4)
Replying to Vaughan Blake1:
Mark Lee headshot 2023
By Mark Lee
26th Mar 2013 06:48

No

I haven't and as I wrote the article from scratch I rather resent the suggestion. 

Mark

Thanks (0)
Man of Kent
By Kent accountant
26th Mar 2013 10:03

Different

 

Hi Mark, in my opinion most clients are aware of the distinction between bookkeeping and accountancy. I expect many small businesses start out doing their own bookkeeping and then as the business grows they look to outsource this, a frequent port of call will be their accountant to ask if they can do the bookkeeping or recommend someone who can.

I don’t think bookkeeping work is easier to secure because of this – most small businesses accept that they need an accountant to help with accounts and tax especially if they trade through a limited company.

On the point about a successful practice where the practitioner is the only one doing the work I would expect £50,000 to be the absolute maximum if they want to maintain quality. Assuming £25 an hour chargeable rate, 40 hours a week then we get to around £50,000 per annum. What about admin time, business development, holidays, sickness?

I think your numbers are wrong on point 5, 5 bookkeepers may help achieve £150,000 but you’d need a lot more to achieve a £500k turnover and a £200k net profit. I would expect each bookkeeper could potentially handle say £42k of business, with around £22k of cost (salary plus overhead contribution) so £20k potential profit per bookkeeper?

The transition you talk about though is one I think many practices follow, many stop at point 2 perhaps edging towards points 3 and 4, this very much depends on the person and what they want to achieve.

 

Note – rates quoted are based on South East England. 

Thanks (3)
avatar
By johnjenkins
26th Mar 2013 15:05

Good article Mark (no punch lines)

I have to agree with Kent accountant. Bookkeepers can rarely get away with more than £15 per hour. Franchises in the Accountancy world don't really bode well for some reason. It must be that an Accountant in practice must have something special that clients can see. We have taken on apprentices who are doing AAT and it's very hard to teach them the fundementals. So making that transition from bookkeeper to Accountant is not an easy process and I don't think a franchise would work.

Thanks (1)
Mark Lee headshot 2023
By Mark Lee
26th Mar 2013 16:08

"Most clients...."

Thanks for those useful insights @KentAccountant  although you may be underestimating what can be earned.

I think you're right when you say "most clients are aware of the distinction between bookkeeping and accountancy".  I'm not at all sure however that most start-up businesses appreciate the distinction as clearly if they have yet to engage an accountant.

Mark

Thanks (0)
Replying to stepurhan:
Man of Kent
By Kent accountant
26th Mar 2013 16:32

How?

bookmarklee wrote:

Thanks for those useful insights @KentAccountant  although you may be underestimating what can be earned.

What do you think a bookkeeper can earn and what are your views based on?

I use subcontract bookkeepers who charge £10-£15 an hour.

I have been approached by local bookkeeping firms who charge £20-£25 an hour.

I don't see how more can be earned?

Thanks (0)
Replying to DMGbus:
Man of Kent
By Kent accountant
27th Mar 2013 19:44

Still want to know - How?

Kent accountant wrote:

bookmarklee wrote:

Thanks for those useful insights @KentAccountant  although you may be underestimating what can be earned.

What do you think a bookkeeper can earn and what are your views based on?

I use subcontract bookkeepers who charge £10-£15 an hour.

I have been approached by local bookkeeping firms who charge £20-£25 an hour.

I don't see how more can be earned?

 

Thanks (0)
Replying to kaff:
Man of Kent
By Kent accountant
05th Apr 2013 11:21

??

Kent accountant wrote:

Kent accountant wrote:

bookmarklee wrote:

Thanks for those useful insights @KentAccountant  although you may be underestimating what can be earned.

What do you think a bookkeeper can earn and what are your views based on?

I use subcontract bookkeepers who charge £10-£15 an hour.

I have been approached by local bookkeeping firms who charge £20-£25 an hour.

I don't see how more can be earned?

 

 

Still thinking about it Mark?

Thanks (0)
Replying to stepurhan:
Man of Kent
By Kent accountant
05th Apr 2013 15:15

Your words

bookmarklee wrote:

Thanks for those useful insights @KentAccountant  although you may be underestimating what can be earned.

I think you're right when you say "most clients are aware of the distinction between bookkeeping and accountancy".  I'm not at all sure however that most start-up businesses appreciate the distinction as clearly if they have yet to engage an accountant.

Mark

Not mine.

If you can't deal with people challenging your comments why do you bother posting?

It's a waste of effort trying to have a discussion with you, unless comments agree with your statements you get defensive and dismissive.

Nothing wrong with my comments I asked you to support your statement which you clearly can't.

Thanks (0)
avatar
By johnjenkins
26th Mar 2013 16:48

I think responsibility

might put off some bookkeepers making that step.

I do know of bookkeepers/pa's who are charging £20 per hour but they are confined to one particular client.

Thanks (0)
avatar
By dbowleracca
26th Mar 2013 22:50

I know of one in te East Midlands earning £40 an hour
A book-keeper I know gets £40 an hour from one of her clients, and then £20-£25 from her others. She does produce good management information but doesn't deal with tax and there are some end of year adjustments, but minimal. So, she could earn £70k a year quite easily with no staff as most work is at client premises.

I think there is a huge opportunity for book-keepers and accountants to both work very well together and each earn more whilst adding value to the client, but we need more good quality book-keepers out there and more accountants who are willing to work closely with them.

Thanks (1)
avatar
By johnjenkins
27th Mar 2013 11:29

I find it very difficult to believe someone will pay someone £40

per hour for bookkeeping services however good they are especially as the other clients are paying £20-£25.

There is only one way, in my view, that this could be achieved and that is a price negotiated for a particular job. That is a bit different to an hourly charge out rate.

I'm sure we can all earn £100+ per hour on some jobs but that isn't the charge out rate.

Thanks (0)
Man of Kent
By Kent accountant
27th Mar 2013 12:18

£40 an hour

sounds more like an accountant especially if they are producing management information.

Thanks (0)
Replying to DJKL:
Mark Lee headshot 2023
By Mark Lee
27th Mar 2013 17:13

And so we get back to the question at the top of the article

Which I might have suggested could also be set out as: When does a bookkeeper become an accountant? 

Does the production of management (accounts) information mean that the person involved could call themselves an accountant and charge more than a (simple) bookkeeper? We all know that qualified accountants will have had much broader and deeper training than even qualified bookkeepers, but where is the dividing line in the bookkeeping related work they do and what they can call themselves?

Mark

Thanks (0)
avatar
By ecirpdivad60
29th Mar 2013 15:16

Bookkeeper to Accountant (just like that)

 

As a sole trader Accountant FMAAT, providing all accountancy and bookkeeping related services, many of our bookkeeping jobs have been taken over from Bookkeepers who because of their limitations possibly as a combination of limited qualifications,lack of accountability to governing bodies, also many do not have a CPD policy or have any PI insurance have resulted in Vat investigations, Tax investigations and voluntary disclosures for past errors after we took over the jobs.

We find that many bookkeeping firms merely process purchase and sales invoices to complete vat returns.  Some take the trouble to analyse the bank payments and receipts but most do not produce control accounts,( cash reconciliations, bank reconciliations etc).  Therefore the ultimate difference is the due diligence of the accountant who has to produce final accounts from the bookkeeping records,will pay particular attention to reconciling payments and receipts with Purchase and Sales Day Books, Investigate any monthly cash differences and ensure that the proprietors drawings levels seem appropriate. 

Slickadder

Thanks (0)
avatar
By johnjenkins
29th Mar 2013 17:31

This is just

number crunching. There is more to being an Accountant than just putting figures together. An Accountant has to be jack of all trades master of some. Bookkeepers put the figures together, then Accountants read them, discuss them with client etc. etc. They generate business with other clients and so-on.

Thanks (0)
avatar
By Shemiltwilliams
02nd Apr 2013 13:38

I've been a bookkeeper for over 15 years, employed and self-employed and recently got AAT and set up my own company.   I find that many businesses come to us to save money on their bookkeeping work currently done by their accountants, whom are charging £45 plus an hour, and rightly so.  I feel price should be based on experience and knowledge.   I worked closely with local accountants who don't like or wish to do the bookkeeping work themselves and recommend us and vise-versa, I don't deal with tax or statutory accounts and don't enjoy them so pass it on, giving us all what we want and enjoy.   The problem is there are different qualities of bookkeepers as with any trade / skill, the last 3 jobs we took on have been dreadful, the bookkeepers which did these jobs prior to us were purely entering information, often in the wrong places, often with no VAT or allowable expenses knowledge, which creates more work for the Accountant at year end and a disgruntled business owner.  So yes, the lines now blur between accountant and bookkeeper as we have the knowledge to put things right, do y/e adjustments and present the accountant with information requiring only putting into statutory format with tax computations.  This works well for us and I prefer to have an accountant "on-side".  Our next step is underway, I have taken on an AAT L4 mature student with no bookkeeping experience!  Mad I hear some scream, but for me it's perfect, he has the fundamental accounting knowledge and I can train and mould him to work how I want, yes I have to train him to use Sage and QB's etc.,, but I don't have to iron out any bad habits formed over the years, he has the VAT and tax etc.., knowledge so with a few months of hard training and supervision he should be good to go!  Yes profitability will drop whilst training, but long term this should generate around £40k gross, excluding payroll which is a cash cow!   I think a lot depends on the knowledge of the bookkeepers, we're asked for management accounts, cash flow forecasts, break-even etc quite often, and seem to have fallen into a "disaster recovery" area where last bookkeepers a made such a mess of things.  Some clients squirm at £25 per hour, quoting they have seen jobs advertised for £8.50 /hr, I always say it's your personal preference, but for £8.50 they often won't have insurance, MLR, ICO reg, qualifications, continuity agreements etc.     For me it's slowly-slowly, picky about the clients we take on, always run a check on them before accepting them, and if their accountant is hard to work with, strongly recommend one of my preferred ones.

Thanks (3)
avatar
By peterhool
02nd Apr 2013 19:16

Niche

If you specialise in a specific business niche a) you can provide more value because of your specialised experience b) benefit from streamlined processing as every client has very similar money flows c) widen your service ie regulatory reporting for insurance firms etc.

The information you derive by working for a number of clients in a specific niche could give rise to many added value opportunities if you widen your thought processes outside of basic number crunching with fee rates well over £100 per hour.

 

Thanks (2)
avatar
By KJ SMITH
04th Apr 2013 13:40

Bookkeeping depends on experience, qualifications and backing.  I have been a bookkeeper for 20 years now, in business, then practice and now both.  I charge £18 per hour and have more work than I know what to do with.  I also sub-contract from some Accountancy firms to help them out as they do me with any queries or questions I have.  I am AAT qualified although once you have this qualification it is down to an individual to keep abreast with new laws and tax regulations etc., this is where I personally choose to stay at bookkeeping level and sort advice when necessary.  I choose not to have CPD etc as I have a very large family and cannot give Accountancy my full attention.  In my mind this is the difference between bookkeeping and accountancy.

Although I have seen some awful work which people who claim to be bookkeepers have carried out!

 

A reference would be strongly advised.

Thanks (1)
avatar
By johnjenkins
05th Apr 2013 11:41

yer come on

Mark you been a bit quiet lately.I'm sure you take you're laptop or tablet or iphone on hols with you - so no excuse.

Thanks (0)
Mark Lee headshot 2023
By Mark Lee
05th Apr 2013 13:53

Sorry. Nothing to think about @KentAccountant

I note that you wouldn't engage a bookkeeper who charges higher rates and haven't been approached by anyone trying to sub-contract out bookkeepers at higher rates. As a result you don't see how more could be earned.

Fine. But there is a wider world out there and your experience does not define what is and isn't possible. Some bookkeepers are better business people and higher performers than others. Same with accountants.

Others on here have shared their views as to the rates good bookkeepers can charge and these comments inevitably reflect a range of experiences too.

As to 'how?' - Forgive me but that's for Pure Bookkeeping to say, and their promo video gives a good idea.

Mark

ps: Whilst I do attempt to engage in the comments section that follows my articles, I only do so when I have the time.  I'm sorry if that isn't always fast enough for some contributors.

 

Thanks (0)
avatar
By johnjenkins
05th Apr 2013 14:26

@Mark

That was a really diplomatic answer, you're not thinking of going into the treasury are you?

Thanks (0)
Man of Kent
By Kent accountant
05th Apr 2013 14:36

@bookmarklee

Why can't you answer the question properly?

You have said that I'm underestimating what bookkeepers can earn.

I don't see how and have asked you to provide details which back up your comment. Have you just been taken in by Pure Bookkeeping's blurb? - mind you couldn't see where they disagreed with my calculations.

As you can't (provide a proper answer) I'll just accept that you're wrong.

 

Thanks (0)
Mark Lee headshot 2023
By Mark Lee
05th Apr 2013 15:06

'you MAY be underestimating'

Please don't put words in my mouth @kentaccountant.

Sorry my reply doesn't satisfy you.

Thanks (0)
Mark Lee headshot 2023
By Mark Lee
06th Apr 2013 16:35

We are clearly at cross purposes @KentAccountant

And you seem to be very cross. Sorry about that.

I stand by my comment that you MAY be underestimating what bookkeepers can earn. The corollary to that statement is that you MAY not be. I have added all I can.

We each have form and reputations on AccountingWeb.  I'm happy with mine in the round thanks. I don't believe your allegations are widely shared and would be very upset if they were.

Mark

ps: I try to pay little attention to the views shared by people like you who hide behind pseudonyms. In my experience those who use their real names tend to be more circumspect in their choice of language and accusations. I have higher regard for and give more time to them generally.

Thanks (1)
Judi Castille senior partner of SP Consultancy LLP Kent, company formations and tax structures
By freelance32
02nd Jan 2015 10:48

Bookkeepers earning accountant rates
Currently working on a guide that deals with this issue. Too many bookkeepers are not qualified and fall very short of the skills they can bring to the business, leaving accountants to complete at a higher rate. They can charge £35 or more per hour as would an accountancy practise if they complete accounts to a higher level. Those year end adjustments are not rocket science and I also train bookkeepers on some fundamental tax basics, like overdrawn DLA..how to monitor and avoid, or allocating assets to nominals linked to capital allowances. This means real time reporting and at year end accountants can take on more strategic work, or ideally throughout the year from more quality accounts data. I hate that bookkeeping is delegated to being a cheap input job but partly that is because too many bookkeepers do not seem themselves to see their huge potential. A stop gap job is often how seen. This is wrong. So yes there is huge potential to increase rates but only if we start to see quality and on time accurate data. Sure help accountants. I spend far too much time posting correction journals and that is expensive.

Thanks (0)