March 21, 2023
Bookkeeping is one of the most crucial parts of any business, but it is often overlooked or seen as unimportant. This couldn’t be further from the truth—accurate bookkeeping is essential for any business, no matter its size. A professional bookkeeper can do more than just keep track of your finances. They can also offer valuable insights and advice on how to improve your business’s bottom line. They can help you reduce your tax liability, make prudent investments, and prevent costly financial mistakes. Hiring a professional bookkeeper is a smart investment that will be beneficial for the long-term success of your business.
What is the role of a bookkeeper?
A bookkeeper’s role is to document daily financial transactions and maintain accounts and is an integral part of any business, regardless of size. Bookkeeping is essential for accurate financial data, tax compliance, and good decision-making and has been a critical aspect of financial recording for centuries. In fact, the earliest evidence of bookkeeping is found in Mesopotamia, dating back to 2600 BC, where records were kept on clay tablets.
When it comes to tax time or when major choices must be made, bookkeepers often provide their financial statements to an accountant.
A bookkeeper can help ensure that your financial data is accurate and compliant while also providing timely advice on how to improve financial performance. In fact, having a professional bookkeeper on your team can save you time, energy, and potentially money.
Bookkeepers are knowledgeable and experienced professionals who can interpret a variety of information and give the best advice for your situation. They can cut through the noise, interpret complex financial data, and make sure that your business is on the right track.
Differences between bookkeepers and accountants
Although a bookkeeper and an accountant both handle financial transactions, their roles and responsibilities are quite different.
A bookkeeper is in charge of keeping track of accounts payable, accounts receivable, and inventory records, among other things. They are tasked with entering data, preparing financial statements, and reconciling accounts.
On the other hand, an accountant is responsible for analyzing and interpreting financial data. They provide strategic advice on financial planning and budgets, assist with estate planning and taxes, and can review and evaluate financial statements.
While bookkeepers work on day-to-day transactions, accountants look at the big picture and advise leadership on how to maximize profits and minimize costs.
What are a bookkeeper’s responsibilities?
Bookkeepers maintain up-to-date financial records to support the overall accuracy of an organization’s books. This involves entering transactions into the appropriate ledgers using double-entry bookkeeping and accounting software. The primary objective is to ensure that all financial information is accurately reflected in the company’s books, from checking that receipts match expenses to balancing the general ledger.
Bookkeeping involves more than just entering data into a spreadsheet – it requires rigorous analysis and legal expertise. In the end, an experienced bookkeeper will ensure that your financial records are in order and recorded accurately, and that your deductions reflect the latest laws and regulations so you can pass an audit. The complexity of overseeing business finances is not to be taken lightly, and anyone who has tried to handle their own company’s books will agree that bookkeepers deserve the ultimate respect.
Let’s take a closer look. Bookkeepers are typically responsible for the maintenance and preparation of four key financial statements.
- The income statement, sometimes referred to as a profit & loss statement, details revenue and expenses over a designated time frame.
- The balance sheet is an overview of the organization’s financial standing at a particular point in time.
- The cash flow statement is a summary of the money coming into and going out of your business.
- The statement of changes in equity (also called a statement of retained earnings) provides information on changes to the company’s share of capital, reserves, and retained earnings within a specified reporting period.
Bookkeeping is an integral part of having a successful business. To ensure everything runs smoothly and efficiently, here are some common bookkeeping tasks businesses need to do regularly:
- Handling accounts receivable and payable to ensure timely payments and collections
- Post credits and debits on a regular basis.
- Remit collected sales taxes to the government.
- Keep track of any debts and make payments as needed.
- Ensuring that incoming payments are recorded and deposited into the bank.
- Complete bank reconciliations on a monthly basis,
- Provide your tax accountant with accurate financial records at tax time.
- Monitor and update your annual budget.
- Identify and report on any discrepancies or inconsistencies that arise.
- Handling payroll processing.
Bookkeepers can also assist you with tax preparation and filing. This is beneficial, as it can save you money since bookkeepers are typically more affordable than Certified Public Accountants (CPAs). However, bookkeepers can’t provide you with tax planning or represent you before the IRS in the event of an audit or other tax-related inquiries.
How can a bookkeeper help you in your business?
Why is hiring a bookkeeper for your business so important? By having a top-level professional bookkeeper, you will gain numerous benefits for your business:
- Smart budgeting, so you know the ins and outs of your money.
- Having the assurance that your books are in order will make submitting your taxes less stressful.
- Being an IRS-compliant business and successfully passing an audit with thorough documentation.
- Being able to focus on running the business instead of managing it.
- Identify the pattern of your business’s cash flow.
- Recognize the important indicators of your financial performance, such as income, expenses, profits, etc.
Two Options for Your Business Bookkeeping
You might not need to employ an in-house bookkeeper, depending on the development of your business. You may either purchase accounting software and do the bookkeeping yourself, which will require some training on how to use it, or you can simply hire a virtual professional bookkeeping service such as Elite Business Solutions.
If you choose to use accounting software, such as QuickBooks, it’s important to consider the time you’ll need to invest in not only learning how to use the software but also accounting and all the tax requirements. These apps may be more budget-efficient, but they’ll cost you a lot of time and effort. At some point, your valuable time will need to be focused on growing your company rather than learning how to do the bookkeeping yourself.
However, if you decide to hire a virtual bookkeeping firm, you have made a smart decision for your business! Your business is on the right path to financial stability. We advise that you hire a professional bookkeeper you can rely on with extensive accounting experience and tax knowledge.
Why does it matter? You’re not just giving your professional bookkeeper access to private information; you also depend on their accuracy and efficiency, which are paramount when managing financial records. A great professional bookkeeper never takes shortcuts, and they are important to business owners who would rather invest their time in expanding their company than managing its finances.
At Elite Business Solutions, we take pleasure in offering our clients the highest level of professionalism and quality in all that we do. See some of our clients’ glowing reviews to find out why working with Elite Business Solutions is the right choice for you.
