Every business requires a bookkeeper. Accurate bookkeeping not only provides insight into the financial health of your business, but also ensures compliance with various tax authorities.
Although some small business owners initially handle their own bookkeeping, most eventually realize the advantages of hiring a professional.
But what exactly does a bookkeeper do?
Generally, a skilled bookkeeper:
Properly manages your financial records
Keeps you informed about your cash flow
Boosts your confidence in making business financial decisions
Recognizing the value a bookkeeper brings to your business allows you to concentrate on other priorities, such as managing your inventory, your team, and your company's growth.
What is a Bookkeeper?
A bookkeeper is responsible for recording your organization's daily financial activities, enabling you and your accountant to make informed business decisions.
More specifically, bookkeepers are skilled in using basic accounting principles (such as double-entry bookkeeping) to accurately track and manage transactions related to your:
Cash flow
Accounts payable and receivable
Payroll operations
Once these transactions are recorded as journal entries in a general ledger, a bookkeeper can use them to create monthly financial statements for your business.
Distinction Between Bookkeepers and Accountants
While the terms bookkeeping and accounting are often used interchangeably, the responsibilities and rates for each role differ significantly.
Bookkeepers handle the data that reflects your business's financial status at any given moment, while accountants possess the expertise to interpret and utilize that information.
Beyond reviewing your books, an accountant can analyze your business's growth and profitability trends, providing advice in areas such as:
Forecasting
Budgeting
Tax preparation and planning
However, hiring an accountant to manage your monthly bookkeeping will cost you significantly more per hour compared to a professional bookkeeper.
Therefore, most businesses maintain their financial data year-round by partnering with an experienced bookkeeping firm and reserve consulting an accountant for specific financial advice, such as during tax season.
What are the daily responsibilities of a bookkeeper?
As we've discussed, a bookkeeper's daily and monthly tasks establish the foundation for accounting analyses that can guide and grow your business.
Since they utilize a data entry system to manage financial transactions related to sales, purchases, payments, and receipts, a bookkeeper's core tasks generally include:
Recording daily sales and expense transactions
Reconciling bank and credit card accounts
Producing monthly financial statements such as balance sheets, income statements, and cash flow statements
Depending on your business requirements and the professional you hire, your bookkeeper may also handle managing and processing payables, receivables, and payroll.
In this scenario, their responsibilities would include:
Recording purchase invoices and making payments to vendors
Issuing client invoices, following up on outstanding balances, and reconciling received payments
Calculating employee wages and deductions
An experienced bookkeeper can also help with accounting software setup, sales tax filings, year-end reporting, and effectively liaise with your accountant.
Advantages of employing a bookkeeper
There are numerous compelling reasons to either hire a bookkeeper or delegate your accounts to a professional bookkeeping service.
As previously mentioned, the paramount reason is to guarantee the availability of a comprehensive, current set of books that enables you to: a) produce precise financial reports, and b) make better-informed business decisions.
Here are two additional significant advantages of hiring a bookkeeper.
1. Identifying (and preventing) potential financial issues. Since a bookkeeper consistently monitors the transactions related to your company's expenditures and revenue, they typically have a solid understanding of what's happening with your:
Cash inflows and outflows
Expenditure patterns
Sales tax-related transactions
This makes them invaluable for keeping you updated on potential financial challenges that may arise—and providing you with time to implement corrective actions (such as reducing or postponing non-essential expenses, for instance).
Similarly significant, a competent bookkeeper can prevent you from costly errors and oversights in record-keeping and tax filing.
2. Organizing your books for year-end. By ensuring your books are accurate and comprehensive by year-end, and that your financial data is prepared for sharing with your accountant, a proficient bookkeeper also guarantees:
You'll encounter reduced stress during tax season.
Your financial information reaches your accountant well in advance, allowing for the utilization of applicable tax deductions and timely filing of returns.
Your business maintains readiness for audits.
Now that you have a clearer understanding of the role of a bookkeeper, it should be evident that enlisting the services of a bookkeeping professional can result in savings of both time and money.
Are you prepared to delegate those laborious bookkeeping tasks, allowing you to concentrate on your core strengths?
Reach out to us to learn more about how Bluemount Backoffice Solutions can provide support.