What Does A Bookkeeper Do For A Small Business?
Keeping the books is just one of the tasks modern bookkeepers might handle. Depending on the business they work with, their duties can be quite diverse.
Accountants help keep your finances in order, but bookkeepers play an essential role too. So what’s the difference between a bookkeeper and an accountant? And how can a bookkeeper help you run your business?
What is Bookkeeping?
Bookkeeping is a growing profession – it is demanding, exciting, challenging and above all, rewarding. It is about understanding how a business works and then providing accurate figures that enable the business to know exactly how well it is doing. For men and women of all ages and from all backgrounds, it provides outstanding career opportunities.
The basic system of double-entry bookkeeping was invented more than five hundred years ago by a Cistercian monk called Luca Pacioli. His system still endures today and is used throughout the world, making bookkeeping a truly international profession. The ICB website will give an understanding of how to train to become a bookkeeper and how to become a member of the Institute. It will also help those who already have a qualification or have been working as a bookkeeper for many years but now want the support of a professional association to enhance career prospects.
Bookkeeping today is far more than entering data and reconciling the bank. Bookkeeping is thinking about the needs of the business, thinking about the processes to get a result.
If you’re in the throws of starting a new business, now’s the time to get a handle on your books. Once your business is thriving, and your cash flow starts moving, you’ll benefit from having a solid strategy when it comes to your bookkeeping. Keeping track of your income and expenses, recording-keeping of receipts and monitoring your invoices are all part of the job. Here are 5 bookkeeping tips for small business owners.
Bookkeepers are responsible for maintaining the financial records of a business or company, monitoring transactions, updating statements and ensuring accuracy in addition to producing financial statements and other reports for management and supervisors.
Using accounting software, spreadsheets and databases, Bookkeepers record information from receipts, invoices and bills to generate reports and collate data. They will also often be given additional responsibilities like purchasing, payroll and invoicing, occasionally requiring them to communicate with clients.
In some cases, a Bookkeeper may be required to prepare Business Activity Statements (BAS) and lodge them for tax purposes. This requires registration as a BAS Agent with the Tax Practitioners Board and will improve the employment prospects of any Bookkeeper.
What Do Bookkeepers Do?
Here are some of the tasks of bookkeeper that will help to keep your business running smoothly:
Keeping track of daily transactions
A bookkeeper can handle the recording of day-to-day bank transactions. If the accounting software you use has daily automatic bank feeds, this is a great tool for your bookkeeper to use. When your bank statement lines are fed into your accounting software, it’s much easier to keep an eye on cash flow and it also saves on data entry time.
Your bookkeeper will manage all your financial transactions by entering them into the system regularly and accurately, allocating them to the correct accounts in your accounting software, and producing weekly or monthly reports that provide useful information on your business performance.
All of your business expenses need to be recorded and reconciled to any purchase orders and receipts of delivery to ensure you are getting what you paid for. Your bookkeeper will carry out this role as well as enter any petty cash and credit card purchases into your accounting system.
They can also monitor who is spending what and identify any potential excess expenditure.
On any given day, your company will be required to pay for essential goods and services. This can be anything from a utility bill to an employee claiming back petrol for travel to a meeting. Tracking these expenses is important since it is the only way you can know if you are getting what you pay for.
Keeping an eye on all of these day-to-day transactions can be time-consuming and labour intensive. A survey from Constant Contact showed that 40 percent of small business owners aren’t able to go on holiday while 40 percent aren’t able to see their family and friends as much as they would like. Tasks like expense tracking are the reason for this since weekends and nights are just about the only time you have available to get it done.
Delegating this job to a bookkeeper allows you to know exactly where the money is being spent without having to track down every last cent yourself.
Sending out invoices and managing the accounts receivable ledger
Preparing invoices and sending them to clients is usually the bookkeeper’s responsibility. Managing the accounts receivable ledger – and chasing late payment – is also likely to be done by a bookkeeper.
A key cash flow driver of every small business is collecting money from customers.
A good bookkeeper will ensure invoices are sent promptly, follow up on late payments and manage all cash coming into the business. This role can often be the make or break of a small business.
Handling the accounts payable ledger
Up to a certain dollar amount, it’s usually bookkeepers who will make payments on behalf of the business. This includes payment of supplier invoices, expenses and petty cash.
Most owners handle payroll themselves during their first few months in business. It is the only way to ensure finances are balanced, and there is enough money to cover wages. As an organisation grows, it will likely add workers, and eventually, the task becomes time-consuming and unwieldy for a small business owner with a million other things to do.
A bookkeeper is better suited to handle all payroll matters. They can check timesheets, pay necessary taxes, allocate any commission-based payments and process the payroll as you would. And since they will oversee finances, they can warn you about any cash flow issues before the money is paid out.
If you employ staff, payroll can become a large task. Paying your staff can involve checking timesheets, allocating any commission payable, calculating payroll tax and superannuation, and keeping accurate employee records including their bank account details. Of course, then the payroll needs to be processed through both the accounting system and the bank account.
Having a bookkeeper will save you an enormous amount of time if your payroll is done weekly or fortnightly.
Most online accounting software packages now link directly to business bank accounts. Your bookkeeper can download banking information directly into your accounting system and allocate payments and receipts into the system.
Reconciling the bank transactions to your accounting system is important because you need to make sure all transactions are accounted for.
Keeping an eye on cash flow
One of the most important tasks for a bookkeeper is making sure the company doesn’t run out of day-to-day money. They can do this by watching the balance of revenues to expenses. Then they can take action or offer advice if it looks like the company needs more ready cash.
Petty cash ensures small businesses have money on hand to cover any emergencies that may arise. It can also fund any small purchases you or your employees might have to make on a daily basis. Much like all other accounts, it is important to track how much petty cash is used and what for. It usually makes sense for the bookkeeper to handle this along with their other duties.
They can monitor expenditures and replenish the petty cash as required while also ensuring no one is going crazy on things like birthday cakes or client lunches. Should you still want to know about cash purchases, you can always have the bookkeeper require your approval for petty cash disbursement.
Preparing the books for the accountant
It’s the bookkeeper’s job to ensure that the accounts are valid and up to date when the accountant needs them. This allows the accountant to use their skills and knowledge to make business recommendations, report to the board and complete company tax returns.
Your bookkeeper should be a registered BAS Agent, which means that they can prepare your BAS in line with the ATO requirements. They will also be able to prepare any payroll tax and superannuation records and payments. If you have any business loans or other areas that require regular reports, they will be able to do this as well.
As was mentioned at the start of the article, there was a time that all financial transactions were entered into a book. Nowadays, everything is entered into a computer programme. In reality, this task is repetitive: manual labour that many small business owners will put off for months.
Not only must this be done regularly, but it also has to be completed by someone who is skilled at using the software. If one payment is entered incorrectly or one expense is missed, it can skew your financial information and take hours, or even days, to find and correct the error.
Bookkeepers are skilled in entering this data, and while mistakes can still happen, they are also able to find them far quicker than you will. And having a bookkeeper doing this regularly means you won’t end up wasting a weekend entering all of these numbers because you kept putting off the task.
Finally, your bookkeeper will provide regular financial reports: profit and loss, balance sheet, budgets and cash flow forecast that will give you all the information you need to improve the financial performance of your business. They will be able to guide you on what areas need improving, and those that are performing well that can be taken to the next level.
In summary, it’s the bookkeeper who does the day-to-day work so that the accountant can concentrate on strategic financial operations. So bookkeepers play an important role – without them, accountants can’t do their jobs.
To get a better idea of what a bookkeeper does, let’s start by dispelling one myth. They don’t actually keep books, that would be the job of a librarian. Instead, they keep financial records.
Sure, all of these records were stored in some massive book-shaped ledger once upon a time. However, most of this information is now stored digitally. They are still called bookkeepers even if they don’t work with physical books for tradition’s sake.
Nowadays they use computer programmes from companies like Reckon to get the job done. And while you might not know exactly what they do, you still probably heard about them.
So, what does a Bookkeeper do? The role of a bookkeeper at a small business could best be described as a finance supervisor. They will keep track of all of a company’s finances, recording them and making sure everything adds up. Here is what you can expect should you choose to hire one.
Responsibilities Of A Bookkeeper
Bookkeepers are responsible for providing accurate, up-to-date financial information about a business. They’re always taking the pulse of a business.
Most often, their reports go to business owners and managers to help them make decisions. Some bookkeepers, however, are actually involved in strategy development.
Bookkeepers may also share some jobs with accountants, such as the preparation of annual financial reports and tax returns.
Don’t Do It Alone
Now that you know the answer to the question “what does a bookkeeper do?” you can see how much work it entails. Small businesses need to be vigilant when it comes to pulling the belt these days. While employees may not be concerned with the day-to-day finances of your company, it’s the only thing a bookkeeper cares about.
In the current economic climate, it has become more essential to manage finances than ever before correctly. Business failures were up in Australia last year with more than 15,000 closings for good in the third quarter of 2016 alone, according to business services firm Dun & Bradstreet.
“I’m not surprised at the failure rate because you need money, resources and customers to survive. Suppose you run out of any one of them. In that case, it’s over,” Karen Lawson, CEO of corporate start-up accelerator Slingshot, told the Sydney Morning Herald when presented with the business failure statistics.
Having a bookkeeper work for you will guarantee you have an accurate idea of your firm’s financial situation while letting you focus on attracting and retaining clients. Some business owners wrongly assume spending money on a bookkeeper to be an unnecessary expenditure. But if you hire a good one, you’ll find they have paid for themselves in a few short months.
You’ll no longer have to spend countless hours on the financial record-keeping tasks you dread. Instead, a professional will be doing all of this for you and reporting back with the details. You can focus on growing your business instead of entering numbers into a computer and tracking down expenses. And maybe, just maybe, you can finally take that holiday you’ve been dreaming about after hiring a bookkeeper.
How To Choose The Right Person To Work With?
Once you have decided whether you want a bookkeeper or an accountant, you need to find the right one for your business.
Both accountants and bookkeepers need to be registered as tax agents or advisors, depending on exactly what they do for you. You can check their registration at the Tax Practitioners Board.
Also, check to see if they are a member of a relevant professional association. Many accountants will be a member of a professional body which requires them to undertake yearly training and professional development activities to maintain a high standard of knowledge and skill throughout their career.
Consider if you want a bookkeeper or an accountant with specific knowledge of your industry. At the minimum, you should try to find finance professionals who have worked with businesses similar to yours.
Also, be aware that accountants have specialities. Some are tax accountants, while others focus more on strategic business advice.
Before you hire an accountant or bookkeeper, make sure you meet them or chat with them and get a feeling for whether they are someone you get on well with and would feel comfortable working with.
Finally, ask them how they like to be contacted. Are they happy to receive a quick impromptu phone call if you have a question or do they prefer to schedule meetings – and then consider how this would fit in with the way you like to work?
Bookkeepers And Accountants Are Not The Same.
If you’re a small business owner, you’ll be familiar with juggling several tasks at once. As well as keeping things running, it would help if you generated income, keep your customers happy and look after financial information. Tracking the financials can be a chore, though, and one of the biggest questions you might have is who you get to help with your accounts. Do you need an accountant, a bookkeeper or both? Let’s demystify things.
Accountants and bookkeepers have different jobs and responsibilities. An accountant’s main focus is:
- the preparation and lodgment of statutory returns
- advising on legal entity structures
- giving general business and financial advice.
Accountants are usually members of a statutory association. Qualified and registered accountants might call themselves CPAs (Certified Public Accountants), CAs (Chartered Accountants) or other titles, depending on the country they’re working in.
Bookkeepers can manage lots of different responsibilities within a small business. But the main focus is the organisation, recording and reporting of financial transactions as part of the operational life of a small business. In more recent times, some bookkeepers have extended their range of duties to include:
- training clients to use accounting software
- implementation of document management and inventory control processes to create efficiencies within the business
- implementation of POS (point of sale) systems that capture the daily transactions in a retail environment.
- Develop, implement, maintain and review internal business processes.
You will often find that a bookkeeper has an area of specialisation and it’s a great idea to ask them more about this when you are looking at hiring them for services.