Every business needs a bookkeeper. Not only does keeping accurate books offer visibility into the financial health of your business, it helps you stay compliant with various tax authorities.
While some small business owners choose to do their own bookkeeping, most eventually recognize the benefits of hiring a professional.
But what does a bookkeeper do, exactly?
Generally speaking, a good bookkeeper:
- Ensures your financial records are managed properly
- Keeps you apprised of your cash flow situation
- Helps you feel confident making decisions involving your business finances
Appreciating what a bookkeeper can do for your business ultimately frees you to focus on other priorities—like managing your inventory, your team, and your company’s growth.
What is a bookkeeper?
A bookkeeper is someone who records the day-to-day financial activities of your organization so you (and your accountant) can use that information to make better business decisions.
More specifically, bookkeepers know how to use basic accounting (in the form of double-entry bookkeeping) to properly track and manage transactions involving your:
- Cash flow
- Accounts payable and accounts receivable
- Payroll activities
After recording these transactions as journal entries in a general ledger, a bookkeeper can use them to prepare financial statements for your business each month.
Difference between bookkeepers and accountants
Although people often use the terms bookkeeping and accounting interchangeably, the responsibilities (and rates) associated with each role are quite different.
Bookkeepers manage the data that shows where your business stands financially at any point in time. Accountants have the expertise to interpret and leverage that information.
In addition to reviewing your books, for example, an accountant can see where your business is headed growth and profit-wise, allowing them to advise you in areas like:
- Forecasting
- Budgeting
- Tax preparation and planning
You’ll pay a significantly higher price per hour, however, to have an accountant handle your bookkeeping every month than you would a professional bookkeeper.
That’s why most businesses stay on top of their financial data throughout the year by partnering with an experienced bookkeeping organization—and reserve working with an accountant for when they need specific financial advice (like during tax season, for example).
What does a bookkeeper do from day to day?
As we’ve seen, a bookkeeper’s daily (and monthly) duties and responsibilities lay the foundation for the accounting analyses that can help guide and develop your business.
Because they use a data entry system to manage the financial transactions attached to sales, purchases, payments, and receipts, a bookkeeper’s core tasks typically include:
- Recording daily sales and expense activities
- Reconciling credit card and bank accounts
- Generating monthly financial statements like balance sheets, income statements, and cash flow statements
Depending on your business needs and the professional you hire, your bookkeeper may also be responsible for managing and processing your payables, receivables, and/or payroll.
In this case, their duties would include:
- Recording purchase invoices and making payments to vendors
- Sending out client invoices, following up on outstanding amounts, and reconciling payments received
- Calculating employee pay and deductions
A highly experienced bookkeeper can even assist with accounting software setup, sales tax filings, and end-of-year reporting—and can liaise knowledgeably with your accountant.
Benefits of hiring a bookkeeper
There are plenty of good reasons to either hire a bookkeeper or outsource your accounts to a professional bookkeeping service.
As we’ve discussed, the most important of these is to ensure you always have a complete, up-to-date set of books you can use to: a) generate accurate financial reports, and b) make more informed business decisions.
Here are 2 more big benefits of hiring a bookkeeper.
1. Spotting (and avoiding) potential financial problems. Because a bookkeeper regularly keeps tabs on the transactions surrounding your company’s expenses and income, they usually have a pretty good idea of what’s going on with your:
- Cash inflow and outflow
- Spending habits
- Sales tax-related activities
This makes them indispensable for keeping you informed about financial issues that may be looming on the horizon—and giving you time to take corrective measures (like reducing or delaying non-essential expenditures, for example).
Equally important, a good bookkeeper can save you from costly record-keeping and tax-filing oversights and mistakes.
2. Keeping your books organized for year-end. By making sure your books are correct and complete at the end of the year—and that your financial information is ready to share with your accountant—a good bookkeeper also ensures:
- You’ll experience less stress come tax time
- Your financial data reaches your accountant in plenty of time to both take advantage of any relevant tax deductions and get your returns filed before the deadline
- Your business remains audit-ready
Now that you have a better idea of what a bookkeeper does, it should be clear that hiring a bookkeeping professional can save you both time and money.
Ready to offload those tedious bookkeeping tasks, so you can focus on what you do best?
Contact us and find out how Enkel can help.
