Bookkeeping is generating and recording data related to business. The role of the bookkeeper varies based on the type and nature of the company. A bookkeeper plays a significant role in small organizations with no accountants. A bookkeeper is an individual who usually engages in many tasks. Some are recording financial transactions, including various receipts, purchases, sales, and other payments. Also, the bookkeeper is responsible for managing the paperwork of the transactions. Recording them accurately in the organization’s ledger accounts is also an important task. Usually, an accountant reviews the work of the bookkeeper.
What does a bookkeeper do for a small business?
A bookkeeper engages in several functions like reconciliation, managing account payables, receivables, and bank feeds. They also participate in preparing financial statements, aligning with laws, and preparing for tax. The tasks they do vary on the nature and the requirement of the small businesses.
Here is a closer look at the things that a bookkeeper can do for a small business.
- Bookkeeper can support the reconciliation of businesses’ bank accounts
One of the significant tasks a bookkeeper engages in is a reconciliation of the company’s financial accounts. This ensures that the details of transactions in the software match with the information in the bank account software.
It also needs to be matched with statements of credit cards, and other various financial statements, etc. One of the essential tasks of any business to continually reconcile its accounts. It will reduce fraud, overdraft fees, and recorded transactions with errors.
Software used to manage accounts makes the process of reconciliation easy. However, the involvement of a human is still required. This is to assure that all transactions are recorded accurately.
- Bookkeepers can manage bank feeds for a small business
The bookkeeper is responsible for managing all the transactions that come through the accounting system’s bank feed. Bank feeds connect your accounting software with the business bank account. This lets you view each other’s financial transactions in real time.
The effectiveness of accounting software plays a significant role in automatically identifying transactions. For example, a transaction done at a hotel using the credit card will be automatically recognized as a travel expense. The task of the bookkeeper is to monitor if these transactions are identified correctly.
Moreover, a bookkeeper is also responsible for manually entering any transactions which are not recorded in the bank feed. Transactions that need to be manually added are the ones that happen outside the accounting systems. Some examples of this are handwritten checks and various other cash payments.
- Account receivables handling to support small business
Managing account receivables can be of multiple forms. The staff might enter their estimates or invoices, and they might also be obtaining payment against invoices.
The client can also use an industry-specific estimating program for job calculation. Then he/she will give the bookkeeper the total. The bookkeeper will then put the data into the accounting software. It will create and progress invoices during each step of the project.
They are developing invoices, sending them across to customers, preparing statements are all critical aspects of account receivables. The client informs the bookkeeper when they have been paid. Then the bookkeeper enters that into the accounting software.
- Bookkeeper helps in account payable handling
Similar to accounts, receivables bookkeepers are also responsible for handling account payables. This involves handling all the account payables of clients. It means that the bookkeeper will manage all the vendor bills obtained by the company.
Moreover, a bookkeeper will also monitor deadlines from vendors and discuss discounts for early payments. With the growth of the company, bookkeepers can add more approvers to take the go-ahead for the payments.
Managing account payables effectively is essential for any business to maintain a strong relationship with the clients. Also, it supports businesses to secure favorable trade credit terms in the long run.
- Bookkeeper prepare financial statements to support small business
Bookkeepers usually prepare multiple financial statements for the business. They are profit and loss statements, balance sheets, and cash flow statements. Any small business needs to update financial statements every month. It helps businesses to obtain important information on the financial health of the company.
Furthermore, the profit and loss statement gives a clear idea of the bottom line and the operating expenses, and the balance sheet provides a picture of the assets and liabilities. The cash flow statement indicates the cash inflows and outflows from the business.
The accounting software used by small companies helps bookkeepers to make these relevant financial statements. Sharing these statements with accounts will lead to critical business decisions.
- Managing the payroll process
Bookkeepers need to engage in payroll and human resources in certain instances. They will participate in entering payroll data into the accounting system. This will be done after the bookkeeper receives the required reports from the payroll service provider. Moreover, they will also maintain time sheets of employees to manage overtime and leave.
- Provide recommendations to streamline processes
Bookkeepers tend to adapt to new technologies faster. It is not surprising for a bookkeeper to find a new application related to your industry. Bookkeepers tend to search for the latest technologies that will support your back-office functions. It is one of the essential things a bookkeeper can do for a small business.
- Maintain accurate financial records
Maintaining financial records up-to-date is an essential task of a bookkeeper. Also, they need to raise any inconsistencies or errors they figure out between books and business accounts. Furthermore, they need to address the identified issue and rectify it quickly.
- Aligning the business with laws
One of the very sensitive areas in business is tax. One slight mistake can lead to a letter from HM Revenue and Customs. One of the most crucial tasks is to keep your business in line with relevant laws and regulations.
- Preparing the business for tax
Similar to laws and regulations imposed, tax deadlines are also a critical factor that needs close attention. A bookkeeper will act as the translator between the business and the certified public accountant. Moreover, a bookkeeper will assure that your financial records are accurate so that the business is ready for tax.
- Managing foreign currency deals
One of the things that a bookkeeper can do for a small business is to maintain foreign currency accounts accurately. He/she can engage in this by using the current exchange rates. A bookkeeper can use a novel digital bookkeeping application to make the task easier. These compatible applications save time and support to analyze exchange rates instantly.
- Performing Stocktaking
Inventory management is a vital function of any business regardless of the size. Bookkeepers need to develop inventory reports by engaging in a stock count. If they identify any mismatches between the actual and the counted Stock, they need to report immediately.
Also, the issue needs to be addressed quickly. This task is usually carried out at the end of the financial year with the figures appearing in company reports.
- Managing the cash flow
One of the essential things a bookkeeper does for a small business is managing cash flow. He/she will make sure that the company will not run out of day-to-day cash. They can engage in this by closely monitoring the balance of revenues to expenses. Also, they can provide recommendations to increase the operating cash flow of the business.
Difference between a bookkeeper and an accountant
A bookkeeper has mastered the skills like recording, monitoring, categorizing, and reconciling transactions of the business. On the other hand, accountants usually hold a bachelor’s degree. They possess the skill of interpretation of financial statements in a meaningful manner. Also, they provide recommendations to improve the business’s financial health.
The qualifications required by a bookkeeper are vast. It includes in-depth knowledge about business. Moreover, accuracy, speed of delivery of work, detail-oriented, and the ability to adapt to changes in technology are also required. Most companies use modern, cost-effective software such as Quickbooks to manage accounts.
So what is the difference between a bookkeeper and an accountant in a small business? Sometimes bookkeepers also engage in accounting functions. One of the classic examples is accounting software making it easy for bookkeepers to maintain financial statements. Accountants used to do this task in the past.
A bookkeeper is more like a cook who prepares meals. He/she maintains books and prepares accurate financial records for the business. On the other hand, an accountant is more like a critic. He will engage in in-depth analyses of the records and provide advice to ensure smooth financial operations.
Benefits of a bookkeeper for a small business
- The small business will be able to maintain financial records up-to-date.
- The bookkeeper will be able to maintain compliance within the business.
- Keeping a bookkeeper will help to develop better tax predictions.
- A bookkeeper is able to enhance the accuracy of the financial data of the small business.
- Having a bookkeeper helps to develop better relationships with customers and suppliers.
- A bookkeeper supports better financial analysis of the small business.
- A bookkeeper can lower the operational cost of functions such as payroll, taking stock take etc.
- Having a bookkeeper helps the small business to better organize important financial information.
Above are the things that a bookkeeper does for a small business. There are a large number of skills that a bookkeeper can give to make your business a success. It is way beyond data entry and consulting books. There are a large number of talents that a bookkeeper can bring than many small businesses could understand.
In conclusion, the tasks the bookkeeper needs to do will depend on the nature and the expectation of the business. Either way, a bookkeeper will help small businesses to release some time and effort required to reach business success.