What is the difference between bookkeeping and payroll?
Correct management of company finances is a crucial part of running a business. It enables well-organised storage and accurate analysis of your financial status. It is key to ensuring that employees and vendors are paid correctly and on time, and tax obligations are properly met.
Therefore, it is important that an experienced, knowledgeable professional manages your company’s bookkeeping and payroll services. This reduces the risk of mistakes being made and ensures your accounts are compliant with HMRC standards and that you fulfil your tax obligations. These duties, however, are different in nature and require different skill sets.
The MSP Organisation, offers a range of outsourced corporate services, including the services in question. MSP Payroll offers an experienced payroll solution, whilst MSP Chalkdell offers reliable bookkeeping services. This allows your business to keep its outsourcing requirements in one place.
You may be wondering if a dedicated payroll professional or a bookkeeper is right for your business in its next stage of growth. But first it’s important to understand the difference between bookkeeping and payroll.
What is payroll?
In its simplest sense, a payroll is simply a list of a company’s paid employees. However, ‘payroll’ or ‘payroll processing’ more commonly refers to a collection of activities surrounding payments to employees, such as distributing payslips, calculating wages, and keeping a full record of employees’ financial status (including tax, bonuses and deductions).
Who looks after payroll processing within a company depends on its structure, but the job can fall under one of several departments including:
- A specialist external individual or agency
In a small business or for sole traders, payroll processing could be carried out by an individual who also supports with other tasks across the company.
What is bookkeeping?
Bookkeeping differs from payroll processing and involves tracking all of the everyday finances of a business.
Bookkeepers keep a record of payments to suppliers or stockists, customer invoices, invoices and even depreciation. They are also responsible for managing accounts, preparing balance sheets, and dealing with bank reconciliations. If a company has a loan, they will also document repayments and outstanding balances. Often, bookkeeping is carried out using software, for example MSP uses Xero as its accounting support software.
These duties may be carried out by:
- A dedicated bookkeeper
- An accountant
- Finance departments
- An external agency
Similarly, to payroll processing, in smaller businesses, it is common for an individual to look after a company’s books who also carries out other tasks within the company.
Key differences between bookkeeping and payroll
Both bookkeeping and payroll involve tracking and keeping a record of company finances. The key difference is what they track. Payroll processing only concerns employee finances, while bookkeeping keeps a more general day-to-day-record of accounts.
They also manage different functions within a company and are often carried out using different specialist tools. It is very important that both payroll and bookkeeping records are accurate and up to date and because of this, many companies assign these tasks separately.
In-house or outsource bookkeeping and payroll services?
As your business grows, your needs become more complex, and administration and record keeping becomes more time consuming. A professional who is skilled in either bookkeeping or payroll, can be a very valuable asset.
Most companies have both bookkeeping and payroll obligations, and for many, the requirements exceed the abilities of a single employee. A full-time accountant may look after both payroll and the company books, but some businesses may not have the need, or the budget, for a full-time hire.
Outsourcing to an external company can be a cost-effective way of accessing the help your company needs, as and when required. An outsourced team can provide years of expertise and knowledge of robust, demonstrable processes, to ensure nothing falls through the cracks, along with access to the best accounting software on the market.
Outsourcing for small businesses
For small businesses or sole traders, managing payroll or bookkeeping can feel like a daunting task. Accountancy software can be complex and hard to navigate. Small errors can turn into big problems, or you may simply not have the time to balance the books alongside running your business.
Outsourcing can give you a direct line to an expert bookkeeper or payroll processor. They can look after the end-to-end process, with solutions available to meet your unique needs and budget requirements.
Outsourced bookkeeping and payroll services
offers both bookkeeping and payroll packages, for a broad range of businesses. Whether you require ongoing monthly support, or ad hoc help – such as filing your accounts at the end of the tax year – we offer flexible outsourced support packages to meet a wide range of needs and budgets.
To discuss your requirements, find out more about the accounting support services of MSP Chalkdell, the Payroll services of MSP Payroll.