How many times have you heard that you require bookkeeping services in the months or years after you first started your business? How often have you silently questioned whether there isn’t a simpler, more effective approach to handling your ledger? For the initial level, you surely need a bookkeeper. But the question arises What Do Bookkeepers Do?
Bookkeepers are those who oversee all financial data for businesses. If bookkeepers were not employed, businesses would not be aware of their present financial condition or internal transactions. Every company needs a bookkeeper. Maintaining accurate accounts not only enables you to see how your company is doing financially but also keeps you in compliance with the tax department.
What Do Bookkeepers Do? – Spectrum of Services
A crucial administrative task for the growth of a small company is bookkeeping, which many entrepreneurs and business owners are ill-equipped to handle. This stress can be relieved with the appropriate bookkeeping services. If you are dwelling over the question “What do bookkeepers do??” then the answer is not just limited to maintaining records of expenses. There are many duties bookkeepers perform. A few of them are –
Accounts Payable
Accounts payable is one of the main areas that bookkeepers oversee. Accounts payable refers to money owing to a company, vendor, or supplier. It is tough to keep track of the payments you are left with and the ones you have wrapped up. A bookkeeper may quickly set up a procedure for noting when invoices are paid and checking with vendors to confirm the payment.
Accounts payable are handled by bookkeepers by:
- Purchase information
- Checking the accuracy of the invoices
- Recognizing payment options and conditions
- Processing transactions
- Mentioning the Information in the general ledger.
Accounts Receivable
Bookkeepers also manage accounts receivable. The money a client owes a company for its goods or services is known as accounts receivable. It is the duty of the bookkeeper to send the invoices and match them with receiving payments. They are responsible for tracking clients who are not paying as per the deadline.
Usually, businesses send invoices on the first of each month. A bookkeeper will enter accounts receivable in the general ledger. They list accounts receivable as a current asset on a balance sheet.
Account Reconciliation
The reconciliation of your accounting transactions is the most crucial activity for any bookkeeper. It is basic bookkeeping service. Account reconciliation ensures that the transaction information in your accounting software and the information on your credit card, bank and other banking information statements are identical. It helps to minimize overdraft fines or fraud.
A bookkeeper will follow these three steps.
- Bookkeepers will first select their approach to reconciliation. The technique selected will depend on how your small business manages its finances.
- The bookkeeper will then compare deposits after that. To ensure that payments appear on both records, they will compare personal records and bank statements.
- A bookkeeper will then search for bank modifications. They will note any bank adjustments in your personal records if there are any.
Payroll Processing
Payroll is another answer to your question about what is included in bookkeeping services. In a few businesses, bookkeepers are also responsible for processing payroll. These actions comprise:
- Reviewing employee data and making any required modifications
- Counting the number of hours worked
- Preparing paychecks
- Calculating deductions
- Filing payroll
Keeping up with Taxes
Tax compliance is the bookkeeper’s basic responsibility. All firms are required to abide by federal and employer regulations. A bookkeeper can assist you in ensuring that your small business complies with tax regulations. You may have to face IRS audits. A bookkeeper’s assistance might be helpful for you because this audit could take anything from a few months to a few years.
Financial Statements
Three components of the stability of your small business are shown in financial statements:
Balance sheet – It is a calculation where assets are equal to the sum of equity plus liabilities. The obligations and equity should be equivalent to the assets.
Cash flow statement – A bookkeeper creates a cash flow statement to show how a business manages its investing, operating and financing activities.
Income statement – A bookkeeper will also determine net income by:
- Adding up all of the period’s earnings.
- Adding up all of your expenses and running costs.
- To calculate net income, subtract all expenses from all earnings.
What are the Types of Bookkeeping Services?
The goal of bookkeeping is to keep an organized, logical record of every transaction so that its financial impact on the company can be seen. There are basically two ways in which you can present records.
Single-Entry System
Every transaction that takes place within a corporation is recorded once in the accounting records under a single-entry system. It is popular among smaller organizations. In general, neither assets nor liabilities are recorded using the single-entry accounting system.
Pros
- Simple to create and far less expensive.
- Ideal for company startups or small businesses.
- No expertise is needed.
- Easy to determine profit and loss for a specific time frame.
Cons
- There is no accurate information for loss or gains.
- Easily susceptible to fraud and entry mistakes.
- Assets and obligations details are not available.
- Challenging to get the auditor’s evaluation of the current financial results.
Double-Entry Method
The double-Entry Bookkeeping System is the traditional method of record-keeping. It provides the idea of debit and credit. It is a trustworthy source of financial information and a fair evaluation of the health of a company’s performance.
Pros
- More understandable and efficient financial account records.
- The effects of each transaction can be determined by this method.
- Due to the trial-error method, it is easier to keep an eye on accuracy.
- Businesses can precisely determine their true profit and loss.
Cons
- Those who are just beginning out may find it more challenging to understand.
- The cost of maintaining a double-entry system is higher as compared to a single-entry system.
- Each transaction’s recording process requires much more time.
Difference Between a Bookkeeper and Accountant
Bookkeeping and accounting experts have diverse backgrounds and take a unique approach to a company’s finances.
- A bookkeeper is responsible for preparing information. On the other hand, accountants translate that information and assess them.
- The accountant serves as a resource and advisor, whereas the bookkeeper’s work is primarily administrative in nature.
- Accountants use their own knowledge and the documents a bookkeeper gives to assist in creating budgets, evaluating finances, and making business choices. An accountant may also supervise a bookkeeper’s job.
How Does a Bookkeeping Service Benefit Your Business?
Another aspect of the question, “What do bookkeepers do?” is how bookkeepers are beneficial. An essential part of operating a company is bookkeeping. Bookkeepers are useful in evaluating the firm’s productivity, resource utilization, and capacity to offer clients the finest items. Bookkeepers help in saving time.
A qualified bookkeeper with established credentials and experience may make your business function more smoothly and be a valuable resource for higher-level finance experts who need accurate, well-organized data to make decisions. A professional reduces the possibility of inaccuracy.
They help your business grow. Bookkeepers track money and provide owners of businesses with updates on the firm’s bank accounts, which can be advantageous to the company in many ways. Bookkeepers will prepare tax returns and manage all aspects of filing taxes.
What is the Average Cost for a Bookkeeping Service?
The average cost of a bookkeeper depends on many factors –
- Client size
- Experience
- Qualifications
- Working hours
- Location
In-house bookkeepers
Monthly Cost: $3,300–3,600
An internal bookkeeper typically makes between $39,600 and $43,200 in basic pay. This equates to a monthly income of $3,300 to $3,600 or an hourly rate of $20 to $22.
Outsourced bookkeepers
Monthly Cost: $350 to $1,500
The price of hiring an outsourced bookkeeper is challenging. It is due to variability in services and firm size.
Frequently Asked Questions about What Do Bookkeepers Do
1. Relevant Knowledge
2. Basic expertise in accounting.
3. Understanding of accounting procedures.
4. IFRS, US GAAP, or another accounting framework understanding
5. Data entry capabilities.
Bookkeepers maintain track of sales and the cost of goods sold. Therefore, they are aware of the resources available. As a result, some bookkeepers also provide inventory management as a service.
A few telltale signs that you need bookkeeping services
1. Your books are not up to date.
2. You are unable to take advantage of tax deductions.
3. Businesses cannot keep track of cash flow and expenses.
4. Your business is expanding.
Bookkeeping services vary from business to business. However, standard bookkeeping includes creating balance sheets and other financial statements. It also includes keeping track of all expenses, cash flow, accounts payable, and receivables.
