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Bookkeeping To Run Your Business

March 30, 2021
Bill Kimball

bookkeeper duties small business

Most businesses save money by hiring professional financial staff to manage their daily business operations. However, depending on the size of your business, your industry, and other factors, you might just need a part-time bookkeeper or require a full financial staff that includes a controller and CFO. Deciding what financial staff your business really needs is a complex decision that depends on many factors.

bookkeeper duties small business

Hiring a full-time bookkeeper in this situation could be the right answer for you. Often businesses try to train an office manager or other employee with capacity to become the part time bookkeeper. While this can work and is often the least expensive option on paper, there are risks associated if the part time employee’s or office manager’s output does not measure up to standards.

Bookkeeper Duties And Responsibilities

The cash flow statement shows the cash flowing into and out of your company. Accounting software allows bookkeepers to prepare these financial statements and share them with your accountant and tax preparer.

On the other hand, an accountant can double as an advice-giver, providing insights and consulting services as well. Generally, a bookkeeper is considered to be less experienced and less expensive than an accountant. Accountants need to have a degree, experience, and some sort of certification, whereas their less-experienced counterparts do not.

bookkeeper duties small business

It’s entirely possible for business owners to keep the books, but it’s not necessarily a good idea as the business grows. When paperwork begins to compromise your time management, job satisfaction or efficiency, it’s time to consider hiring a bookkeeper. You might not need to hire a full-time worker and can even outsource all or part of the accounting work such as payroll. Most bookkeepers work reactively recording what has already been done financially in the company with little or no influence on business strategy. Bookkeepers work on a transactional basis and seldom make decisions about future business transactions. Many times, a bookkeeper job description and that of an accountant are lumped together into one category. The differences between an accountant and a bookkeeper are largely colloquial, but there are some key separations.

Let’s take a look at some of the typical responsibilities of a bookkeeper. Before we dive deeper into the question at hand—What does a bookkeeper do? Stacy Kildal is owner/operator of Kildal Services LLC—an accounting and technology consulting company that specializes in all things QuickBooks.

If your business is new, you may only get a bookkeeper at the end of the year. You can go from having a bookkeeper on a quarterly basis to having someone come in monthly until you eventually hire someone full time. If you’re spending more time organizing your books and falling behind on other aspects of your business, it may be time to hire a bookkeeper.

These financial reports show a businesses bottom line and operating expenses, the balance of assets and liabilities as well as the cash flowing in and out of the business. Another big responsibility of bookkeepers is that they prepare invoices and send them to your clients so you can receive payment on time. Managing the accounts receivable ledger is also likely to be done by a bookkeeper – as well as chasing up late payments so your records are always accurate. At a basic level, bookkeepers manage transactions brought in through software, like an app. Bank feeds, that link the software with your business bank account, allow you to see each transaction in real-time.

Similarities & Differences Between Accounting & Bookkeeping

Bookkeepers keep an eye on these transactions and make sure they are being categorized correctly. Even if you have a smaller company, you will definitely want to hire a bookkeeper with experience doing taxes for a business. Taxes can have a major impact on your income and even your ability to remain a functional business, and a bookkeeper who has tax experience can help you reduce your tax burden legally. Are you using an accountant to manage your daily transactions and run your monthly payroll? If so, you could save a lot of money by having a bookkeeper do this work instead. The accountant does the work that they have been trained to do, while the bookkeeper provides the necessary financial data.

bookkeeper duties small business

In some small businesses, the bookkeeping and accounting functions are both outsourced. If you outsource your bookkeeping and accounting, you’ll still want to be familiar with them both to understand the reports you’ll receive. In cash-based accounting, you record revenue when you receive it, and record payments when they are made. This method is usually limited to small businesses in the service industry that has no inventory. The function of accounting is to prepare a record of the company’s financial affairs.

Accounts Receivable

If your business is moving into a growth stage, you need to consider graduating to full accrual based accounting, with financial and management reports that help you scale. Typically you will need this level of financial management not only for yourself but for your key stake holders including banks, investors and advisors. A full-time bookkeeper handles the day to day accounting functions for your office. Keeping your books in order and up-to-date is the foundation of the financial strength of your business.

Not only are you entrusting your bookkeeper with sensitive data, you are relying on their accuracy. A good bookkeeper never cuts corners, and they are indispensable to business owners who want to spend time growing their business, instead of maintaining it. That said, bookkeeping is more than just dropping numbers into a spreadsheet—it takes meticulous analysis and just enough legal know-how. After all, bookkeepers will help you survive an audit by making sure your records are in order and your deductions are legal. Bookkeepers offer a literal look at where you stand financially at the moment, and accountants help you see the bigger picture and the path your business is on. In colonial America, bookkeepers would record transactions in a “wastebook”—so called because the data would eventually find its way into an official ledger and the original book would go into the trash.

You may need both a bookkeeper and an accountant, or you may need one or the other. As a field service business owner, you can’t do absolutely everything. For example, businesses that don’t stay on top of monthly bills can end up spending and wasting money on avoidable late fees.

So, generally, an accountant’s role requires more education than a high school diploma. Accountants may have a bachelor’s degree in finance and training in bookkeeping roles. Of course, education depends on the individual or bookkeeping service you hire.

If all your mental powers have been focused on getting your business off the ground, you might not fully understand what a bookkeeper does. In this guide we break down the day-to-day role of a bookkeeper, and why a good one is worth holding onto. The accountant is responsible for reconciling the work completed by the bookkeeper. While all of the duties listed above fall into the “financial management” category, it’s essential that you have a clear separation of duties and an understanding of where the responsibilities lie. Additionally, this separation of duties minimizes the risk of fraud in your company. Generate financial reports, such as balance sheets and income statements. Complete data entry and collect transaction details for incoming and outgoing bank accounts.

  • But just because you are in the early stages of growth, doesn’t mean that you don’t have access to professional accounting or bookkeeping services.
  • 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.
  • One of the important habits you should develop when you start a business is recording transactions in your general ledger.
  • Your bookkeeper may help you generate the invoice, collect a payment, enter the transaction into the general ledger, and document the paid invoice.
  • But things can become much more challenging than necessary if your bookkeeping records are out of order.

While you may be more comfortable with a bookkeeper who physically visits your company, a bookkeeper who works remotely can be a cost-effective alternative. Bookkeeping, accounting, and auditing clerks earned a median annual salary of $38,390 in 2016, according to the U.S. On the low end, bookkeeping, accounting, and auditing clerks earned a 25th percentile salary of $30,640, meaning 75 percent earned more than this amount. In 2016, 1,730,500 people were employed in the U.S. as bookkeeping, accounting, and auditing clerks. Bookkeeping will help you do all of this – and will also provide you with useful insights into the financial health of your business.

The accountant will also file the company tax return forms and arrange for tax payments to be made. An accountant or bookkeeper can also help you choose the right accounting software and set it up so that it works well for you and your employees – especially your bookkeeper. If you’re a small business owner, you’ll be familiar with juggling several tasks at once.