Bookkeeper, accountant, CFO – what do they all do?
A GUIDE TO WHO DOES WHAT FINANCE FUNCTION
There are some clear boundaries as to who does which tasks, but also a number of grey areas. As businesses grow over time the work becomes more complex and requires a higher level of expertise.
Initially a business will have no internal resources and everything needs to be done by the ‘high street’ accountant. However, as time goes by it becomes more cost effective to bring some of the tasks in-house. If it continues to grow it will eventually have a full-time CFO or Finance Director, Financial Controller, teams of Accountants and Assistant Accountants. Often in large companies only compliance services are bought in from external accountants (tasks such as audit and the filing statutory of accounts and tax returns).
This article outlines the most common finance tasks for each role and how these might evolve as your business expands.
Bookkeeper - Main tasks
Record of financial transactions
monitor and reconcile bank
statements
manage supplier and client payments
Payroll - in some cases
VAT returns - in some cases
Accountant - Main tasks
Manage compliance
Produce statutory accounts
End of year tax returns
Auditing
VAT returns
Payroll
CFO - Main tasks
Act as a sounding board to the MD
Advise on business strategy
Review management information
Analyse financial performance and provide insights
Produce budgets and long-term forecasts
Attend regular management meetings
Maintain a risk register
Manage funding requirements
Manage finance staff
Advise on systems and controls
Bookkeeper
A bookkeeper's role is to keep a record of financial transactions within a business. Most bookkeepers will record sales and purchase invoices on a computerised accounting system, monitor and reconcile bank statements, manage supplier payment runs and chase late payments from clients. They might also run the payroll and produce the VAT returns.
A more experienced bookkeeper might also produce some management information or forecasts, but that would be unusual.
They are the go-to person for all day-to-day finance issues and a good one is worth their weight in gold. The role could be full-time or part-time as either an employee or a freelancer. In a small business this person IS the finance department.
A bookkeeper will be significantly cheaper than either a finance director or an external accountant. As such it makes sense for them to manage as many finance tasks as possible, but without straying into areas where they are not qualified.
There are a number of recognised bookkeeping qualifications such as AAT (The Association of Accounting Technicians) and IAB (The International Association of Bookkeepers), but many good bookkeepers are simply qualified by experience (QBE).
Whilst an inexperienced bookkeeper might cost as little as £15 per hour, expect to pay around £40 per hour for an experienced freelancer.
‘High Street’ Accountant
Definitions of the role ‘accountant’ vary significantly. Some mirror the role of the bookkeeper, whilst others include analysis, insights and advice. The service you receive from your accountant will depend on the package you have chosen and often this is just the basic compliance work.
Anyone can call themselves an accountant, but in this context I am referring to firms of accountants that generally work from offices in the High Street. Traditionally they were named after the original partners e.g. Smith, Jones and Co. and will provide accounting, auditing and advisory services to businesses and individuals.
Anyone who has started a business is likely to have engaged an accountant to liaise with the tax authorities, register a company, or otherwise help with the regulatory side of setting up a business.
Having established a relationship, the same accountant will often manage the year end work for the company. Businesses change accountants about as regularly as individuals change banks!
Whilst your relationship is likely to be managed by one of the partners of the firm, day-to-day interactions tend to take place with more junior staff. Partners will generally have a portfolio of 100 clients or more, so don’t expect to see much of them. All the senior staff are likely to be qualified with the Institute a Chartered Accountants England and Wales (ACA) or the Association of Chartered Certified Accountants (ACCA). Historic transactions make up most of this work, but more comprehensive packages may include analysis and guidance.
The work done by the accountant will include managing compliance – producing statutory accounts and the tax return at year end and filing both with the relevant authorities. If your company requires an audit this must be completed by a registered auditor and it makes sense for this to be your accountant.
They may also provide payroll services, VAT computations and filing. There is often some level of ad hoc advice as well. In larger SMEs the accountant might also attend some board meetings, produce budgets and forecasts or act as a sounding board, but these future-facing activities are less common in this relationship.
The High Street accountant is the most expensive of the three finance resources. Charges are usually based on hourly rates – from £50 per hour for an unqualified junior to £400 per hour for a partner.
Annual fixed price contracts are becoming more common. Overall a typical SME might pay £2,000 pa for a basic compliance package.
CFO or Finance Director
The ACCA’s description of the CFO or Finance Director role states that this person ‘is the most senior finance professional in an organisation’ who ‘assumes a leading strategic role in influencing the future direction of an organisation’.
In a business with more than 100 employees it would not be unusual to have a full time CFO, but in smaller businesses the role of a part time CFO has become more common over the last couple of decades. This person is likely to be a qualified accountant and would probably be a member of either the Chartered Institute of Management Accountants (CIMA) or the ACCA. The CIMA qualification is generally seen as more commercial, whereas the ACA qualification is aimed at accountants in practice. The ACCA qualification covers both disciplines.
In an established SME the role performed by the CFO is likely to include the following:
• acting as a sounding board to the MD,
• advising on business strategy,
• reviewing management information,
• analysing financial performance and providing insights,
• producing budgets and long-term forecasts, and
• attending regular management meetings.
Other tasks might also include the supervision of finance staff including the bookkeeper, advising on systems and controls, preparing year end files for the external accountant, maintaining a risk register and managing funding requirements.
A part time CFO is likely to charge a day rate, although monthly retainer packages are becoming more popular. Restating these as hourly rates to make it an easier comparison with the bookkeeper and accountant above, an CFO is likely to cost somewhere between £70 to £200 per hour.
Movement over time
Most start-ups will rely heavily on their external accountant in the beginning. The entrepreneur's focus is likely to be on sales and operations and when there are a limited number of transactions it is not uncommon for the accountant to do all the bookkeeping work.
As time goes on and the number of transactions increase most companies will employ a bookkeeper to deal with the day-to-day work either as an employee, or a freelancer. If the business continues to expand the bookkeeper might be replaced by an internal finance team which could include a qualified or part qualified accountant.
But this structure will generally only manage historic data. If the business is to grow you will need benchmarks, insights, analysis and a plan as well as someone to keep you accountable. In some cases the external accountant might provide all of this, but it is more likely that you will need to engage a CFO.
Conclusion
A successful business needs an effective finance function. As the business owner you are unlikely to have the skills and experience to manage the finance function yourself, but you will need to understand the principles and bring the right resources into the company.
You’ll need a good accountant (if only to comply with the minimum regulatory requirements), and an experienced bookkeeper to manage the finance admin and help keep the cash flowing. But none of those tasks help you improve your business.
Only about 4% of businesses ever achieve annual sales of £1,000,000 and if you want to join them, you’ll need to take your finance function seriously.
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