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What do bookkeepers do?

DISCLAIMER: We’re commenting on USA and U.K finance legislation.

Keeping thorough and precise financial records isn’t the most exciting aspect of starting a business, but it’s essential for success. It’s not just about spreadsheets and software; good bookkeeping is the foundation that allows you to make great business decisions.

Many entrepreneurs either lack the time or the skills to handle their bookkeeping. The correct bookkeeping system can save you time and money without jeopardizing your financial security.

We’ll go over what bookkeepers do and how to find a good one for your company in this article.

We can promise two things about your business: you earn money, and you spend it, whether you sell handmade alpaca socks, enterprise software, or legal advice. Bookkeepers assist you in keeping track of everything.

If you’ve spent all of your mental energy getting your company off the ground, you might not completely comprehend what a bookkeeper performs. We explain down the day-to-day responsibilities of a bookkeeper in this guide, and why a good one is worth keeping.

If you’re a first-time business owner, you definitely have a few concerns: “Do investors require me to wear a tie to meetings?” “Are standing desks worth it?” “Will anyone object if I take a client call in this Chipotle?”

While knowing whether or not standing desks are beneficial is vital, the issue of “What do bookkeepers do?” is possibly the most important. Bookkeepers are critical to your business’s success, and without them, you may quickly lose money.

We break down what bookkeepers do and why you need one to aid confused entrepreneurs everywhere. It has nothing to do with starting a book club in the office (though that is always a nice idea).

A (very) brief history of bookkeepers

Bookkeepers in colonial America kept track of transactions in a “waste book,” so named because the information would eventually be transferred to an official ledger, and the original book would be discarded.

To keep track of funds, today’s bookkeepers employ some sort of software platform. However, just like in the ancient days of waste books, bookkeepers often turn over their records to an accountant at tax time or when major choices must be made.

The Bookkeeping Basics

Bookkeepers, to put it simply, are experts that oversee and record all of your company’s financial transactions. Bookkeepers ensure that your financial records are not only organized and complete, but also correct, by keeping track of this information. In other words, bookkeepers act as a spell checker for your money, seeing everything.

Bookkeepers vs. Accountants

Some financial responsibilities are beyond the scope of bookkeepers; this is where accountants step in. While bookkeepers maintain track of daily transactions, accountants use that knowledge to create financial models.

Accounting, on the other hand, is more subjective and requires sophisticated interpretation—such as assisting you in determining when it’s time to incorporate or paying your taxes to receive the highest potential return.

Accountants help you understand the wider picture and the route your organization is on, while bookkeepers provide a literal look at where you are financially right now.

To work as a bookkeeper, you don’t need any additional training or even a bachelor’s degree.

Accountants, on the other hand, must complete extensive training and pass standardized exams in order to become certified public accountants.

While it’s evident that bookkeepers play a crucial part in the financial management of businesses, you’re probably wondering how this differs from what an accountant performs. Let’s break it down:

Bookkeeping:

  • Bookkeeping involves the consistent recording, storing, and retrieving of daily financial transactions.
  • For the most part, bookkeeping is straightforward and transactional.

Accounting:

  • Accounting is a high-level process that takes financial information and produces financial models based on data to reveal the bigger financial picture.
  • Unlike bookkeeping, accounting is far more subjective and often calls for skilled interpretation.
  • In other words, bookkeepers are the ones collecting and managing the data, while accountants are the ones interpreting it.

While these roles may seem rather different, they are equally important when it comes to handling business finances.

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Accountants need bookkeepers to keep a meticulous record in order to produce their analytical evaluations and interpretations.

Conversely, bookkeepers rely on accountants to provide them with a clear idea of what information must be logged and the proper structure for keeping records.

In short, both work in tandem to help you make smarter financial decisions.

But what does a bookkeeper do all day?

A bookkeeper’s responsibilities will always include data input and receipt management.

They’re in charge of employing double-entry accounting to record every financial transaction in your general ledger, also known as recording journal entries.

That may sound complicated, but it usually means entering all of your transactions into accounting software.

However, bookkeeping entails more than simply entering data into a spreadsheet; it takes thorough analysis and just enough legal knowledge.

After all, bookkeepers will ensure that your records are in order and that your deductions are lawful, which will help you survive an audit.

Let’s break it down further. Typically bookkeepers are responsible for preparing four key financial statements:

  • The income statement (also known as a profit and loss statement) illustrates your revenue and costs for a given time period.
  • A balance sheet is a snapshot of your financial situation at a specific point in time.
  • The cash flow statement is a record of the cash and cash-like equivalents that enter and leave your business.
  • A statement of changes in equity (also known as a retained earnings statement) displays how your portion of capital, reserves, and retained earnings have changed over time.

Some other important things they can do to help your business run like a well-oiled machine:

  • Accounts payable and receivable management (make sure you get paid on time, and pay your bills on time)
  • Collect sales tax and send it to the government
  • Monitor your debt levels and make payments to any debts that are due.
  • Incoming cash should be recorded and deposited at the bank.
  • Every month, handle bank reconciliations.
  • Make sure your CPA has proper financial statements for tax season.
  • Keep track of your annual budget.
  • When difficulties and differences arise, report them.
  • Payroll processing

They can frequently handle a portion of the tax preparation, leaving your accountant with less work (which is a good thing because bookkeepers are less expensive than a CPA). However, they will be unable to assist you with tax planning or the preparation of your tax return.

Things Bookkeepers Do For Small Businesses

Day to Day Management of Accounts

A bookkeeper can maintain track of all transactions in your business’s accounts on a daily basis. It’s far easier for them to keep track of your cash flow if you keep note of every sale or transaction and use software to do so.

It also cuts down on data entering time.

Maintain Up-to-Date and Accurate Records

A bookkeeper will maintain track of all of your company’s financial data. Furthermore, it will be their responsibility to identify any discrepancies between your books and your business finances, ensuring that problems are resolved swiftly.

Keep Businesses Aligned With Laws

Taxation may be a touchy subject. If you make a mistake, you may receive a letter from HMRC. That’s where bookkeepers come in, since they can ensure that your company follows all applicable laws.

Remember, they’re here to assist, not to generate more serious issues.

Keep You Prepared For Tax

Tax deadlines are just as tight as the laws and regulations.

Many small firms do not prioritize bookkeeping, allowing deadlines to slide through the cracks. A bookkeeper will ensure that your records are accurate, so you’re always prepared for tax, to keep the taxman happy and avoid paying any further fines.

Manage Bank Feeds

At its most basic level, bookkeepers oversee transactions entered using software, such as an app. You can observe each transaction in real-time thanks to bank feeds that connect the software to your corporate bank account.

Handle Accounts Payable

Payments on behalf of your small business are normally made by bookkeepers. Payment of supplier invoices, petty cash, and costs are all examples of this.

Send Out Invoices and Manage Accounts Receivable

Another important task for bookkeepers is to produce invoices and submit them to clients so that you can get paid on time. A bookkeeper is likely to manage the accounts receivable ledger as well as chase down late payments to ensure that your records are always accurate.

Prepare Financial Statements

Small business bookkeepers will also be in charge of compiling some important financial statements. A profit and loss statement, balance sheet, and cash flow statement are examples of these.

These financial reports indicate a company’s bottom line, operating expenses, asset and liability balances, and cash flow in and out of the company.

Process Payroll

Bookkeepers provide a wide range of services. For small enterprises, some can handle payroll and other HR services. This could involve supporting employers with the processing of employee paychecks and tax payments.

Deal With Foreign Currency Transactions

Bookkeepers also ensure that foreign currency balances are kept up to date using current exchange rates. Compatible digital bookkeeping software that can rapidly analyze exchange rates without wasting time can make this much easier.

Perform Stocktake

Bookkeepers also create inventory reports for small enterprises by counting stock items. If there are any disparities, they notify the company so that problems can be addressed swiftly.

It’s usually done at the end of a company’s fiscal year, with the results appearing in reports like profit and loss statements.

Keep an Eye on Cash Flow

One of the most critical things a bookkeeper can do is ensure that a small business does not run out of funds. They can do so by monitoring the revenue-to-expense ratio and provide further guidance if the company requires additional funds to operate.

Preparing the Books For an Accountant

It is the responsibility of the bookkeeper to ensure that the accounts are valid and up-to-date when the accountant need them. This enables an accountant to use their expertise to offer business advice and file tax returns.

  • Why do you need a bookkeeper? You’ll get some of the following benefits if you hire a top-notch bookkeeper:
  • Knowing exactly where your money is going will help you make better budgeting decisions.
  • You’ll have peace of mind knowing that your books are in order and that tax season will be a breeze.
  • Detailed documentation and audit-proof company
  • More time in the day to devote to your business
  • Recognize your company’s seasonal flow.
  • Understand your company’s main indicators, such as revenue, costs, and profitability.

You won’t need a full-time bookkeeper if you manage a small firm. You may either use bookkeeping software to do it yourself or hire a part-time, virtual bookkeeping service like Bench to do it for you.

What is the workplace of a Bookkeeper like?

Bookkeepers work in practically every industry, as well as in schools, the government, and businesses that provide accounting, tax preparation, bookkeeping, and payroll services.

The work schedule of a bookkeeper is frequently determined by the size of the company for which they work. A bookkeeper may be all a small firm needs to pay bills, reconcile income and payments, and monitor bank statements. This takes only a few hours per month. As a result, these businesses may not require a full-time bookkeeper.

Larger enterprises, on the other hand, may require daily or weekly debit and credit balancing, necessitating the employment of a full-time bookkeeper.

Some bookkeepers prefer to run their own businesses and provide services to clients such as financial support, consulting, and even teaching in-house accounting employees.

Why All of This Matters to You

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So now that we’ve answered the question “what do bookkeepers do?”, it’s time to address the most important question of all: “why does all this matter to you?”

It’s probably clear by now that bookkeepers play a pretty important role in keeping your business finances in check. But more specifically, the biggest benefits of hiring a bookkeeper are:

  • They provide clean, accurate, and comprehensive financial records for banks, investors, tax accountants, and even the IRS.
  • They take care of the data entry and administration that goes into keeping proper financial records, leaving you with more time to spend running your business.
  • They provide a snapshot of the financial health of your business to help you make key decisions.
  • They keep an eye on your financials to ensure your cash flow stays healthy.

If you’re a first-time entrepreneur and you’re ready to take your business to the next level, the benefits of having a bookkeeper on your team are invaluable.

Choosing a Bookkeeper

Every business, we feel, requires an accounting solution, but how you fill that gap is highly dependent on the balance between your bookkeeping needs and your budget.

When it comes to bookkeeping solutions, you have four possibilities. Choosing the best bookkeeper for your company begins with weighing those possibilities.You can:

  • Hire a full-time in-house bookkeeper to work alongside your staff.
  • Fill in the gaps yourself with bookkeeping software.
  • Employ exclusively human bookkeepers.
  • Use a hybrid service that blends human expertise with automation’s efficiency.

The right option for you comes down to a number of considerations, including:

  • Your financial situation.
  • The duties that must be completed.
  • The size of your company.
  • Plans for expansion include obtaining money, scaling up, and so forth.

The ultimate goal is to find the most capable bookkeeping system that will benefit your business in the long run, not just now. That’s why, rather than settling for the first Google search result, it’s vital to consider those four variables before making your decision.

What Makes a Good Bookkeeper?

Regardless of which bookkeeping solution you choose, there are a few things that every great bookkeeper should bring to the table. When weighing your options, indulge a heavy bias toward bookkeepers who are:

  • Experienced and reliable.
  • Passionate about helping your business grow.
  • Able to translate your books so they make sense to you.

A professional bookkeeper allows you to concentrate on growing your business while providing you with the financial data you need to make those decisions. It’s always worth investing in data that can help you grow and develop better.

“Bean counter” has somehow become a disparaging phrase. Anyone who has tried to handle their own business’s income and expenses understands that bookkeepers deserve a lot of respect.

It’s a job that requires the interest and motivation to always find answers to unanswered questions—as well as the willingness to perform some investigation when the numbers don’t line up. It also necessitates a high level of trust. You are not only handing sensitive data to your bookkeeper, but you are also relying on their accuracy. A smart bookkeeper doesn’t take shortcuts, and they’re essential for business owners who want to focus on building their company rather than managing it.

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