Bookkeeper or accountant: what does your startup really need?

"Do we need a bookkeeper or an accountant?" It's one of the first financial questions founders ask, and the answer is often slightly different than expected. Here's the difference, and what actually matters for a startup.

The terms get used interchangeably, but they're two different roles. In short: a bookkeeper keeps your administration up to date, while an accountant looks at the bigger picture and provides assurance. Neither is better than the other, they simply do different work. We'll explain both below.

A bookkeeper keeps your administration in order: recording invoices, processing bank transactions, filing VAT returns, and making sure your numbers add up. This is the daily, continuous work your financial insight rests on. Without solid bookkeeping, every report, and every decision based on it, is a guess.

An accountant looks at the bigger picture and provides assurance. The classic tasks: compiling or auditing the annual accounts, issuing a statement that banks and investors rely on, and advising on tax and business-economic questions. Where the bookkeeper produces the numbers, the accountant puts a stamp of reliability on them.

Assurance is not one thing either. There are three levels, and the difference in price and turnaround between them is large.

• Compilation: the accountant draws up the financial statements from your administration and issues a compilation report. Whether the underlying figures are correct is not tested. This is what most startups need.
• Review: a more limited engagement than an audit, resulting in a review report. It is rare among young companies and is sometimes requested by a lender.
• Audit: the statutory audit, with an auditor's report. This is the heaviest level, with the most work and the highest cost.

If an investor or a bank asks for assurance, ask which of the three they mean. It saves you a multiple in cost if the answer is a compilation and you had bought an audit.

This is where the nuance lies. In practice, most startups mainly need excellent bookkeeping and tax handling, plus a properly compiled set of annual accounts. What they rarely need is a full statutory audit. That's for large companies, and as a startup you fall well below the thresholds. A full accountant is also an expensive choice for that early stage, for something you don't need yet. So you're better off bringing one in at the moment it actually matters.

What you do critically need, and where it often goes wrong, is up-to-date insight. A bookkeeper who updates once a quarter leaves you in the dark about your cash position, burn and runway. Exactly the numbers you steer on as a founder, week to week.

More concrete than getting big: the statutory audit obligation starts at the medium-sized class. That boundary sits at a balance sheet total of 7.5 million euros, net turnover of 15 million euros and 50 employees, and you have to meet at least two of those three for two consecutive years. Almost every startup sits well below it, even after a serious round, because capital raised is not revenue.

What does apply to nearly every BV is filing. The board prepares the financial statements within five months of the financial year end, the shareholders then have two months to adopt them, and within eight days of adoption they go to the Chamber of Commerce. On a calendar financial year that lands on 8 August. If the shareholders grant an extension for special circumstances, 31 December is the final date.

A few concrete moments:

• A funding round or due diligence, because investors want reliable, substantiated numbers.
• A financing application at a bank.
• More complex structures, such as a holding company, share schemes or international activities.
• When your company grows enough to fall under the statutory audit obligation.

For those moments you want someone with accountancy expertise at the table, not just someone who records entries.

The word audit gets used in conversations where something quite different is meant. If a bank or an investor asks for one, ask which of the three levels they have in mind. In practice the answer usually comes down to three things that have nothing to do with an audit.

• Current figures: a balance sheet and a profit and loss account no older than a month.
• A reconciliation: your bank balance and your revenue matching your general ledger and your VAT returns.
• Substantiation: an invoice or contract underneath the large items, and someone who can explain why a month deviates.

That is work a good administration produces, and it needs no report at all. Only when a report is genuinely required, because a lender makes it a condition for instance, does an accountant come into it, and then usually with a compilation rather than an audit.

There are two ways to lose money here, and they sit at opposite ends.

The first is buying too much: paying for assurance nobody asked you for. An audit is the heaviest level with the most work, and a startup well below the statutory thresholds has no obligation to it whatsoever.

The second is buying too little, and that one is more expensive. An office that updates once a quarter is cheap right up until something is needed. Then the financial year turns out not to be closed, the VAT returns do not reconcile to revenue, and weeks of work have to go in while somebody is waiting on your figures. What you saved on the monthly fee, you pay back in turnaround at the worst possible moment.

It helps to ask the question not as bookkeeper or accountant, but as continuous or one-off.

• Continuous, every month: processing bank and invoices, the VAT return, the payroll tax return as soon as someone is on the payroll, and figures that stay current.
• Once a year: the year-end close, the corporate income tax return and filing the annual accounts.
• Occasionally, and not with us: tax planning, a valuation, a financing question or a formal report.

The first two lines are most of the work and all of the deadlines. That calls for a party doing it continuously, not someone who turns up once a year with a folder.

• How current is my administration, and where can I see that for myself?
• Who files my VAT, payroll and corporate income tax returns, and how do I know it happened?
• What exactly is in the year-end close, and what gets billed separately?
• What do you not do, and who do you refer me to then?

On that last question, an honest answer is worth more than a list with everything on it.

So for most startups the question isn't 'bookkeeper or accountant' but which of the two you need continuously and which you need occasionally. Continuously, we keep your books automatically up to date, file your VAT, payroll and corporate tax returns, run the full year-end close and deliver investor-ready reporting. Occasionally something else comes up: a formal set of annual accounts, which we provide as an optional add-on, or a question about tax planning, a valuation or financing. That last category isn't our work. We don't advise; we make sure the figures underneath such a question are correct and current, and we'll say so when the question belongs with a specialist.

• A bookkeeper keeps your administration current. An accountant provides assurance and advice.
• Most startups mainly need solid, up-to-date bookkeeping and tax handling, not a full audit.
• An accountant becomes important around funding, financing and growth.
• Keep the roles apart: continuous bookkeeping, filings and reporting from us, advice or an audit from a specialist when the moment calls for it.