As far as many people understand it, a bookkeeper is merely involved with taxes. The truth, however, is that a bookkeeper’s services extend far beyond that to helping properly manage all of a business’s finances. For any company to sustain itself and grow, a bookkeeper is indispensable.
What Is a Bookkeeper?
The irony of the misconception that all a bookkeeper does is help with taxes is that a bookkeeper cannot even file taxes; you need an accountant. However, a bookkeeper maintains accurate, thorough, and comprehensive financial records for the client or their client’s clients.
Single-entry vs. Double-entry
There are two basic methods of bookkeeping: single-entry and double-entry. When deciding how to manage bookkeeping for your small business, you need to decide which method to use.
Single-entry bookkeeping, in which you only enter each transaction once, may be simpler for sole proprietors without employees operating from home with a small inventory. But, even then, and indeed for any business more complex, it’s rarely the most efficient, accurate, or thorough method.
For that, a business requires double-entry bookkeeping, in which every entry must correspond with and match an equal and opposite entry in another account. Only a trained and experienced bookkeeper can ensure all this is done consistently and effectively.
Difference Between Bookkeepers and Accountants
Bookkeeping and accounting are not the same things, and both are necessary for a company’s financial health. A bookkeeper records data for an accountant to classify, interpret, summarize and report upon. Without entirely accurate and thorough financial records from the bookkeeper, the accountant cannot effectively perform their job.
A Bookkeeper’s Duties
Track and Record Financial Transactions
A bookkeeper tracks all of a company’s financial transitions, including those stemming from:
- Income from products and services, both real and receivables
- Expenses – Again both realized and payable
- Payment processing company fees
The bookkeeper firstly identifies and records all this information on a daily basis in a company’s daybook. This record contains all of a company’s daily sales, payments, purchases, and receipts, including whether the transaction was conducted in cash or on credit.
The bookkeeper then categorizes all of this data and records it in the company’s ledgers, including a customer ledger, supplier’s ledger, and general ledger, as applicable. The bookkeeper further double-checks all this data to ensure all the company’s ledgers are accurate and complete.
In this manner, the bookkeeper keeps a close eye on all funds into and out of a company’s coffers, and all funds committed to or from the company for fulfillment in the future.
With that information in hand, bookkeepers then reconcile all of a company’s bank accounts. That means they compare all records of transactions to ensure the figures all balance out and are all in agreement. Reconciliation additionally includes confirming the accounts recorded in a company’s ledgers are all consistent.
Report to Employers
After that, the bookkeeper’s role is to take the salient elements and conclusions of this information and communicate it to the employer or decision-makers at that company in a comprehensible manner.
With a bookkeeper in your employ, every month, that bookkeeper will provide you with a snapshot of your business’s finances, giving you a clearer idea of the financial health of your business. This includes:
- Balance sheet – Reflecting your company’s present, overall financial position
- Profit and loss statement – Tracking earnings, expenses, and, ultimately, profitability
- Cash flow statement – Recording all transactions, both of incoming and outgoing funds, and identifying how much cash the company has on hand at any moment in time
- Accounts receivable and payable – Showing the outstanding amounts a company has yet to pay to creditors and receive from debtors, including their respective due dates
Armed with this information, you can make smarter money choices and build a short- and long-term strategy to help actualize your company’s vision to its fullest.
Prepare Employers to Report
A bookkeeper also prepares statements for employers to fulfill their reporting duties, such as to the IRS. The information a bookkeeper tracks, records, and reconciles over the year is handed to the company’s accountant, who then uses that information to help file the company’s taxes.
This is where the common conception of a bookkeeper comes from because the tasks a bookkeeper performs are instrumental to the accountant being able to properly and accurately file a company’s taxes so the employer pays the least, gets the most in rebates and refunds, when applicable, and ensures the company pays no fees or penalties.
Beyond this, however, the employer can also present the information a bookkeeper provides to prospective business partners and investors.
Benefits of a Bookkeeper
Many of the benefits of having a bookkeeper in your employ are evident and implicit in the description of the duties a bookkeeper performs. Others may be less so.
Building a Financial Foundation
There’s a whole other level to a bookkeeper’s function, and it underlies all of those duties and responsibilities mentioned above. The foundational role of a bookkeeper is to help a business develop and apply its fundamental financial structure.
Every company manages its finances differently, and it’s up to the company’s bookkeeper to help devise and implement the right and best form of financial management to suit that specific company’s unique current position and future vision.
It’s this process that ultimately determines the financial strength or weakness of a company, its potential for growth, and the adjustments it may need to make to achieve that potential. Uniformity in how a company tracks, pays, and reports on its finances helps owners and managers gain a clear perspective on the company’s underlying financial foundation to better focus on applying their expertise to maintaining and building the business.
Just as importantly, this also helps insulate a company from various costly and potentially perilous financial risks.
Coordinating With Leadership and Teams
A good bookkeeper also coordinates with all management and departments within a company to ensure the company’s greater financial picture informs all decisions and actions. That means the bookkeeper approves all purchases and collects regular expense reports from each part of the overall team. This often includes undertaking cash flow analysis and budgeting duties as well.
Because of this, a bookkeeper not only requires meticulous and impeccable math, organizational, and management abilities but excellent people skills as well.
The right bookkeeper can save your company a bundle of expenses in several ways. For one, properly maintained books help avoid costly financial errors. They also help ensure the company’s regulatory compliance, which, in turn, helps prevent costly penalties.
Additionally, bookkeepers can identify and apprise you of any waste and mismanaged inventory and supplies. A bookkeeper also saves you money by saving you the time and energy of attempting to keep your company’s books yourself. This, in turn, leaves you the time and energy to focus on the elements of running your business that require your direct attention and unique expertise. And, having access on-hand to all your company’s financial records makes you a smarter and more capable leader.
A bookkeeper plays a key role in helping your business achieve ongoing profitability to maintain itself and sustain growth. This, in turn, helps you ensure your company’s longevity and continued positive impact on your industry.
Bookkeeping for Small Businesses
Another common misconception about bookkeepers is that they’re only necessary for large businesses and corporations. Many business owners and managers believe they can perfectly manage their company’s financial records using bookkeeping software. But, while bookkeeping software certainly can help organize a company’s books, the software is only as good, accurate, and useful as the person using it.
A small business may not actually seem so small when you hone in on its books. Among the accounts and records a small business needs to keep include:
- Accounts receivable and accounts payable
- Loans payable
- Payroll and related expenses
- Retained earnings
- Owner’s equity
Finding a Quality Bookkeeping Services in Charlotte
If you run a small business in Charlotte, you need a bookkeeping service with experience in small business bookkeeping. One way you can save a great deal on the costs of hiring a bookkeeper is by finding one who is also a tax accountant. By having your bookkeeper also be your accountant and vice-versa, you know that both arms of your financial team are in constant communication and agreement.
Scott Boyar is a trained, experienced, and licensed bookkeeping services CPA. The best CPA for bookkeeping and accounting in Charlotte, Scott Boyar can provide you with the financial recording and reporting you need, all from one house. To learn more about what he can do for your Charlotte small business, contact Scott Boyar, CPA, online or call his office at 704-527-2725 today.