Not necessarily. There are three common ways to organise it: an in-house bookkeeper, an independent bookkeeper working alongside your accountant, or one firm doing both. Each can work well, and each can go wrong.
What matters more than the model is two things. Someone has to be clearly responsible for the books being right. And the handover between the person keeping the books and the person preparing the accounts has to work.
We offer both bookkeeping and accounting, so it is fair to say that up front. The aim here is to help you pick the model that fits, not to argue for one.
Option 1: an in-house bookkeeper
A member of staff, full or part time, keeps the books and your external accountant prepares the year-end accounts and tax returns.
Where it works well
- High transaction volumes or lots of day-to-day finance admin, such as supplier queries, credit control and payment runs.
- Someone on site who knows the business, its customers and its suppliers.
- Quick answers to operational questions.
What to watch
- A single point of failure. Holidays, sickness or a resignation can leave gaps.
- Skills. Day-to-day processing is different from month-end work such as accruals, prepayments, VAT adjustments and balance sheet reconciliations.
- Review. Someone with the right knowledge should be checking the work regularly, not just at the year end.
- Cost. Salary, pension, software, training and cover all count.
Option 2: an independent bookkeeper and a separate accountant
An external bookkeeper keeps the books, and a different firm prepares the accounts and tax returns.
Where it works well
- A good bookkeeper who knows your business and is responsive.
- Clear roles, with each side knowing who does what.
- The two firms talk to each other, and year-end adjustments are fed back into the books.
What to watch
- Gaps between the two. Problems found at the year end have to be traced back and fixed, and it may not be clear who pays for that.
- Adjustments that never reach the books. If the accountant corrects figures for the accounts but the bookkeeper's records are not updated, next year starts from the wrong place.
- Different standards. The bookkeeper may code things one way and the accountant expect another.
- Two relationships and two sets of fees to manage.
Option 3: one firm doing both
Your accountant also keeps or reviews the books, often with management accounts produced from the same records.
Where it works well
- One point of responsibility for the numbers being right.
- Year-end adjustments flow straight back into the books.
- Consistent coding and treatment, which makes monthly management accounts more reliable and the year end quicker.
- VAT returns, payroll and accounts are prepared from the same records and checked against each other.
What to watch
- You still have a job to do. Paperwork, approvals and explanations of unusual items have to come from the business.
- Less day-to-day presence than a member of staff, so operational admin may still need someone internal.
- Dependency on one firm. That is fine if it is a good one, but check how they handle cover and review.
- Cost. It may look higher than a cheap bookkeeper plus a separate accountant, though the comparison should include the time spent fixing problems between the two.
Is one model cheaper?
On paper, sometimes. In practice, the cheapest option is the one that produces reliable numbers without rework. Bookkeeping that needs correcting at the year end often costs more in the end, in fees, in time and in decisions made on the wrong figures. The Hidden Cost of Cheap Bookkeeping covers this in more detail.
How do you decide?
These questions usually point to the right answer:
- How much is there to do? High volumes and lots of admin often justify someone in-house. Lower volumes rarely justify a full-time role.
- How complex is it? VAT schemes, stock, multiple companies, foreign currency and payroll all increase the need for someone with accounting knowledge in the process.
- Do you need monthly numbers you can rely on? If so, the books need to be reconciled and reviewed every month, not tidied once a year.
- Who reviews the work? Whichever model you choose, someone other than the person entering the transactions should check it.
- Who is accountable when something is wrong? If you cannot answer that clearly, the arrangement needs attention.
Can you combine the models?
Yes, and many established businesses do. A common arrangement is an in-house person handling day-to-day processing and admin, with the accountant doing the month-end reconciliations, adjustments and review, and producing the management accounts. That combines local knowledge with accounting oversight.
What matters most?
Reliable records, reviewed regularly, with clear responsibility. If you have that, the model matters less. If you do not, changing who does the work will not fix it on its own. The process around it needs to change too.
Bookkeeping & Finance explains our bookkeeping and outsourced finance support, and Accounting covers the year-end and tax side. If you are rethinking the whole relationship, Switching Accountants explains how a change works.