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The Different Types of Accounting: Your Quick Explainer

A large part of running a business is running its finances. Here are the different ways to do it

What is Financial Accounting?

The purpose of financial accounting, also known as bookkeeping, is to track, record, and report on financial transactions by generating financial statements. These statements are then used to determine several things, like how your business is doing, how it's likely to do in the future, and how much tax it should be paying. 

 

Financial accounting provides an accurate look at business performance over a specified period and is often provided to outside stakeholders such as investors and financial institutions.

The Importance of Good Bookkeeping

Good bookkeeping isn't just about numbers and taxes; it's the bedrock of a healthy financial life. Imagine your finances as a house - strong, organised bookkeeping lays the foundation, ensuring everything runs smoothly. Bad bookkeeping means your business could stumble upon unexpected tax bills, struggle to make crucial decisions, or lose financial certainty. 

 

Good bookkeeping equips you with the power to make informed choices, plan for the future, and weather any financial storm your business may be forced to encounter. Remember to consider the importance of good bookkeeping; it's the key to building a solid financial future.

What Are the Different Types of Accounting?

There are several types of financial accounting, each with a different purpose. Business valuation accounting, for example, aims to gain an understanding of how much a business is worth, while tax accounting helps businesses determine how much tax they owe. 

 

Financial accounting ensures transparency and accuracy in reporting your company's financial health. A financial report should paint a clear picture of your business's financial performance from the balance sheet to the income statement.

 

Though most types of financial accounting concern the past performance of your business, it can sometimes be used to make predictions. Management accounting revolves around using financial data to inform strategic decisions within a company; analysing costs, performance, and budgets to help your organisation use its resources most effectively. Similarly, cost accounting delves into the granular details of expenses, analysing the costs associated with the products and services you provide.  

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Our Partners
  • Brookson Group Ltd
  • Clever Accounts Limited
  • Contrast (Accrue) Accounting limited
  • SKS Business Services Limited
  • Unbiased Limited
Our Products
  • Business Accountancy
  • Business Epos Systems
  • Business Telephone Systems
  • Commercial Waste Collection
  • Digital Marketing
  • Fleet Tracking
  • Invoice Finance
  • Merchant Accounts
  • Website Design

Accounting Solutions for Your Business

There's a range of solutions available for businesses that want to get a firm grip on their business accounts; from accounting software to outsourced accounting, there are options available to businesses like yours. 

Accounting Software

Accounting software is widely used by businesses to manage their finances. They are sophisticated computer programs that crunch all the numbers so you don't have to. Tasks like account reconciliation and report generation can be done automatically, making your life easier. 

 

If you're unsure about how to tackle your business's finances, getting some accounting software could be the answer to your business's long-term financial health. 

Outsourced Accounting

Outsourcing your accounting is different to using accounting software. Outsourced accounting is the delegation of your financial functions to a third-party provider. The accounting firm you choose takes responsibility for managing your bookkeeping, payroll, tax compliance, and financial reporting. 

 

It works by handing over the financial management of your business to a team of experts, offloading many of your bookkeeping burdens. Outsourcing your accounting also allows you to access a wide pool of accounting expertise; something your business would otherwise struggle to benefit from. 

 

Moreover, accounting firms already use cutting-edge software and technology, so you don't have to worry about learning to use it yourself. Additionally, the firm that does your accounting will be able to provide valuable insights into your business and identify trends and opportunities for improved financial performance. 

Get an Accountant for Your Business Today

If you think the best method for your business to handle its finances is outsourcing, then you're not alone. Many businesses across the country outsource their accounts and have great success in doing so.

 

If you think your business could benefit from outsourcing your accounting, then you're in the right place. Just tap the button below and answer a few questions about your business to get a range of free quotes tailored to your specific business needs.

FAQs

Your Questions Answered

Financial accounting, also known as bookkeeping, is the tracking, recording, and reporting of financial transactions by generating financial statements. These statements are then used to determine several things, like how your business is doing, how it's likely to do in the future, and how much tax it should be paying. 

Outsourced accounting is the delegation of your financial functions to a third-party provider. The accounting firm you choose takes responsibility for managing your bookkeeping, payroll, tax compliance, and financial reporting. With these tasks outsourced, you become free to focus your efforts on other, more important, business objectives. 

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Benefits of Outsourcing Your Accountancy

Outsourcing your accounting can offer numerous benefits for businesses of all sizes. It involves paying an external accounting firm that specialises in doing the accounting on behalf of businesses like yours.  This means that you don't have to hire an internal accountant as a permanent staff member. Small businesses on a tighter budget often find that outsourcing their accounting services can prove particularly helpful, as it saves money in the long run. Benefits of Using Outsourced AccountantsWhen compared to the cost of maintaining an in-house accounting team, outsourcing your accountancy can significantly reduce expenses within your business. You'll avoid the costs associated with hiring and training a permanent member of staff, you'll also save on the costs of office space, equipment, and software. The expertise provided by accounting firms is often difficult or expensive to find in-house, especially for smaller businesses. Additionally, the firm you choose can scale its resources up or down based on your business's needs. This ensures your business has access to support as and when it needs it. Outsourcing accounting tasks also relieves your business of the burden of managing payroll, handling invoices, preparing financial statements, and staying up-to-date with tax regulations. All of this is handled by the accounting firm you choose, so time is freed up and you and your staff can focus on other things. How to Choose an Accounting Firm for Your BusinessIf you do want to outsource your business's accountancy, there are a few things you should consider when choosing a firm. The firm should be able to make informed decisions on your behalf and be comfortable with the complexities of your specific industry.  Chiefly, you should be looking for security. One of the things that puts people off using an outsourced accountant is the security risk posed by providing an accountant with sensitive financial data. These concerns are justified; you should take data protection seriously as you need to do so to avoid problems within your business. This is why using an accounting firm with a proven record of good security is important.  If you're looking for an external accountant to save money on hiring a full-time member of staff, then the cost of the accountant you use will be a factor in your decision-making. Take time to understand what your business needs and make your decision carefully. Outsource Your Accounts TodayOutsourcing can save a lot of time and resources for your business and also offer an easy way of relieving the strain that bookkeeping can put on smaller businesses. As a result, many businesses opt for outsourcing.  Picking the right accountant for you might seem difficult, but it doesn't have to be. Answer the question below, then a few more quick questions about your business, and you'll get a range of free quotes tailored to your specific business needs.

March Newsletter

Bank of England Holds Interest Rate...But Says a Drop Could be ComingMarch saw the base level of interest held at 5.25% - their highest level for 16 years - but the Bank's governor Andrew Bailey told the press that the recent drop in inflation was "very encouraging and good news." Inflation (the rate at which prices rise) has been at record levels over the last few months but dropped to 3.4% in the year leading to March. The drop brought the rate of inflation closer to the Bank's target of 2%.  While there's still a way to go, Mr Bailey told the press that cuts to the base interest rate could come before inflation hits 2%, as long as the Bank is confident inflation is sure to get there. This doesn't mean a drop in interest rates is sure to happen soon, but the Bank is more confident that a drop is possible given the way things are heading. If a drop is coming, it could be as early as May this year, which is the next time the Bank of England meets to discuss a possible drop.HMRC Commits to Keeping its Self-Assessment Helpline OpenHM Revenue and Customs (HMRC) has reversed its decision to close its self-assessment helpline for half of the year. The tax authority recently announced that the phone line, which offers business owners guidance with their taxes, would be closed between April and September every year, with taxpayers directed to alternative online services instead.  But it later went back on the decision and said the phone line would stay open throughout this summer. The reversal of the decision happened quickly; responding to a significant number of taxpayers that were opposed to the change.  As it stands, the phone line remains open for all your tax queries. Red Sea Attacks Continue to Push Costs UpBusinesses across the UK have expressed concerns about facing higher shipping costs and delays due to Houthi attacks in the Red Sea. The delays, which have lasted up to four weeks, were revealed by the business group, British Chambers of Commerce (BCC). The BCC has said that more than a third of the companies it surveyed said they had been affected by delays and the figure rose to more than half among exporters.  Exporters, retailers, wholesalers and manufacturers were more likely than other companies to be affected, leaving these types of customers short of goods to sell and components for production lines.  In a blow to those hoping the economy is bouncing back, the BCC also warned that the delays could contribute to higher prices in the UK economy generally.Recovery Loan Scheme ExtendedAs part of the spring budget, the chancellor announced that the Government's Recovery Loan Scheme will be extended.  The Recovery Loan Scheme supports access to finance for small and medium-sized UK businesses, so they can grow and invest. The loan, which offers up to £2 million per business group, can be used for any business purpose, including working capital or investment. The government guarantees 70% of the finance to the lender but, as the borrower, you are 100% liable for the debt.  You may be eligible for a loan through the Recovery Loan Scheme if your business is trading in the UK, has a turnover of £45 million or less and isn't in difficulty. Find out more about the scheme on the UK Government website. 

Five Benefits of Business Accounting

What Is an Outsourced Accounting Service?They're accounting firms that specialise in providing accounting services to businesses. This means that you don't have to hire an internal accountant as a permanent staff member, or even worse, do it yourself.  Due to this, smaller businesses that are on a tighter budget may find outsourcing their accounting services particularly helpful. Read on to learn everything you need to know about having your accounting tasks outsourced and how it can benefit your business in numerous different ways. Five Benefits of Using External Business Accountants1. Save Time and Improve Efficiency  On average, small business owners spend 10 hours per month on bookkeeping. This is wasted time that could be spent focusing on improving other areas of your business.  2. Save moneyOutsourcing your accounts is far more cost-effective than hiring a full-time member of staff, as you're not paying a salary, sick leave, holiday pay, or any other benefits your business may offer.  3. Avoid HMRC Penalties If you submit your VAT returns via paper without authorisation, HMRC will fine you £400.  This is just one of many baffling fines that you could end up paying if you don't truly understand how to navigate HMRC.  4. Record Keeping It doesn't matter if you're a limited company or a sole trader; you need to keep your financial records for at least six years if you're a limited company and five years if you're a sole trader. Failing to do so could result in a £3000 HMRC fine and being disqualified as a company director.Keeping track of and properly storing these documents can be a time-consuming task that is easily avoidable by using external accountants.  5. Expert Skill SetWith their years of experience, accountants can help with other areas of your business, such as financial strategy and relationship building with banks and solicitors. They will also often have access to specialised accounting software, which will help eliminate any risk of human error.