Exploring the Role of a Bookkeeper: What Does a Bookkeeper Do for Your Business?

Are you overwhelmed by receipts, invoices, and bank statements?  Running a business is a full-time job, and keeping up with finances can easily fall by the wayside. But should you write off a bookkeeper as an unnecessary expense?

A skilled bookkeeper can navigate the complexities of your business's money flow to free you up to focus on what you do best. Should you hire one? In this article, explore how a bookkeeper can streamline your finances and empower you to make informed decisions.

What Does a Bookkeeper Do for a Business?

1. Accurate Financial Record Keeping

Bookkeepers are responsible for meticulously recording all financial transactions, ensuring every sale, purchase, receipt, and payment is documented correctly.

This creates an accurate and up-to-date ledger that reflects the financial state of the business. Using accounting software like QuickBooks or Xero, bookkeepers manage bookkeeping tasks efficiently, ensuring data entry is precise and timely. This includes:

• Daily Transactions: Recording daily sales and purchases.
• Expense Tracking: Monitoring and categorizing business expenses.
• Revenue Recording: Logging incoming payments and revenue streams.
• Invoices: Managing invoices and ensuring timely payments from customers.
• Receipts: Keeping track of all receipts to support financial transactions.

Further reading: Introduction to Bookkeeping: What Are the Duties, Their Importance, how a Bookkeeper Can Help Your Small Business

2. Financial Reporting and Analysis

Bookkeepers prepare regular financial reports, which provide insights into the business’s financial performance. These reports are essential for business owners to make informed decisions and maintain financial health. Bookkeepers use bookkeeping and accounting software to streamline the preparation of these reports, which include:

• Monthly Reports: Summarizing monthly financial activity.
• Quarterly Analysis: Providing in-depth financial health checks every quarter.
• Year-End Reporting: Preparing annual financial statements for tax returns and business evaluation.
• Financial Statements: Generating balance sheets, income statements, and cash flow statements.

3. Bank Reconciliation

One of the significant bookkeeping tasks handled by professional bookkeepers is bank reconciliation. They ensure that the business’s financial records match the bank statements, identifying and rectifying any discrepancies. This process is vital for maintaining accurate financial information and preventing fraud. Tasks involved in bank reconciliation include:

• Reconciling Accounts: Matching internal records with bank statements.
• Error Correction: Identifying and correcting inconsistencies.
• Fraud Prevention: Detecting unauthorized transactions early.
• Accounts Receivable: Ensuring that all incoming payments are accurately recorded and deposited.

4. Payroll Management

Bookkeepers manage the payroll process, ensuring that all employees are paid accurately and on time. This includes handling salary calculations, deductions, and tax withholdings, often using specialized payroll software integrated with the business’s accounting systems. Key payroll management tasks include:

• Salary Processing: Calculating and disbursing employee salaries.
• Tax Compliance: Ensuring proper tax deductions and filings.
• Benefit Administration: Managing employee benefits and deductions.

How Businesses Benefit from Hiring a Bookkeeper

1. Enhanced Financial Accuracy and Compliance

• Regulatory Compliance: Bookkeepers keep up with the latest financial laws and regulations, ensuring your business is always compliant. They are often familiar with certifications from the American Institute of Professional Bookkeepers or similar organizations.
• Error Reduction: Utilizing double-entry bookkeeping, bookkeepers minimize mistakes in your financial records, which can save you from potential financial pitfalls.
• Audit Preparedness: With accurate and up-to-date bookkeeping records, your business will always be ready for an audit by certified public accountants (CPAs).

2. Time and Cost Efficiency

• Focus on Core Business: Free up your time to focus on growing your business instead of dealing with routine bookkeeping tasks.
• Cost Savings: Avoid expensive errors and financial corrections by having a professional manage your books using bookkeeping software like QuickBooks Online or Intuit.
• Efficiency Gains: Bookkeepers streamline financial processes, making your business operations more efficient and cost-effective.

3. Improved Cash Flow Management

• Receivables Tracking: Ensuring timely payments from clients, which helps maintain a steady income stream.
• Payables Management: Scheduling and managing outgoing payments to avoid late fees and maintain good supplier relationships.
• Cash Flow Optimization: Keeping a balance between income and expenses to ensure your business has the cash it needs for operations.

4. Strategic Financial Insights

• Trend Analysis: Identifying financial patterns over time, which helps you understand your business's performance.
• Performance Metrics: Measuring key financial indicators, giving you a clear picture of your business's health.
• Strategic Recommendations: Offering insights and recommendations based on financial data analysis to improve your business operations and profitability.

Tips in Hiring the Right Bookkeeper for Your Business

1. Look for Relevant Experience

• Industry Experience: Ensure they have a background in your business sector. Small business owners especially benefit from bookkeepers familiar with their specific needs.
• Track Record: Check their history with previous clients for similar businesses and the types of bookkeeping they have performed.

2. Check Their Qualifications and Credentials

• Certifications: Look for certifications from the American Institute of Professional Bookkeepers or the National Association of Certified Public Bookkeepers.
• Education: They should have at least an associate or bachelor’s degree in accounting or a related field. This credential ensures they have the foundational knowledge needed to perform bookkeeping tasks.

3. Verify Their Technical Skills

• Software Proficiency: They should be skilled in using popular bookkeeping software and understand the difference between various tools.
• Tech-Savvy: Check if they can handle new software and adapt to technological changes, including automation tools.

4. Evaluate Their Understanding of Your Business Needs

• Business Acumen: They should understand your business model and objectives and know what’s important for your organization’s financial health.
• Customization: They should be able to tailor their services to meet your specific needs, whether it's for routine tasks or more complex financial analysis.

5. Look for Strong Communication Skills

• Clarity: They should be able to explain financial reports and data clearly, using terms like debit and a credit in an understandable manner.
• Responsiveness: They should be prompt in responding to your queries and concerns, helping you keep your finances on track.

6. Consider Their Availability

• Availability: They should have enough time to dedicate to your business needs, whether they work in an office or remotely.
• Flexibility: They should be able to accommodate your schedule and deadlines, ensuring seamless operation of your financial tasks.

7. Check References and Reviews

• References: Contact their past clients to get feedback on their performance, including their ability to handle business transactions and prepare financial analysis.
• Online Reviews: Check reviews and ratings on professional platforms for additional insights.

8. Assess Their Attention to Detail

• Detail-Oriented: They should have a keen eye for details, ensuring every debit and credit is correctly recorded.
• Accuracy: They should be committed to maintaining accurate and precise bookkeeping records, essential for audits and tax returns.

9. Discuss Their Fee Structure

• Transparent Fees: They should provide a clear breakdown of their fees for informational purposes.
• Value for Money: Ensure their services offer good value for the cost, considering the additional responsibilities they may handle.

10. Ensure They Understand Compliance and Regulations

• Regulatory Knowledge: They should stay updated on financial laws and tax regulations in the U.S., ensuring compliance in all business transactions.
• Compliance: They should ensure your business adheres to all relevant financial regulations, reducing the risk of penalties and keeping your books audit ready.

Further reading: What to Look for in the Right Bookkeeper for Your Business

Understanding the Evolving Role of Bookkeepers

Aging Workforce

Many experienced bookkeepers are retiring, creating a shortage of skilled professionals. As seasoned bookkeepers leave the workforce, the need for new talent rises. Businesses must consider the skills you'll need to be a bookkeeper in the U.S. and the differences between bookkeepers and accountants.

Shifting Role

Automation frees bookkeepers from data entry, allowing them to focus on analysis and financial advising, tasks in higher demand. This shift means bookkeepers help businesses keep their finances in order through more strategic roles. Understanding what’s the difference between traditional bookkeeping tasks and modern responsibilities is essential.

Growing Businesses

With more businesses launching, the need for strong financial management, a bookkeeper's specialty, increases. As of 2021, the Bureau of Labor Statistics (BLS) notes that businesses keep growing, making financial management a crucial aspect. Coursework in accounting and a high school diploma are common educational paths for those entering the field.

Virtual Boom

Remote work lets businesses access qualified bookkeepers anywhere, boosting demand. This trend allows bookkeepers to work with clients globally, offering third-party services and outsourcing solutions. The flexibility of remote work means bookkeepers can enjoy working from anywhere while providing essential services.

Bookkeepers are not accountants, but their roles are critical in financial management. From controller positions to auditing clerks, the career paths vary depending on skills and education. The BLS projects a steady demand for bookkeepers through 2024, ensuring that businesses always need reliable financial support.

Bookkeepers vs. Accountants for Businesses

• Bookkeepers: Handle daily financial tasks like recording transactions, managing invoices, and reconciling bank statements. They keep the financial data organized and ready for analysis. Bookkeepers also ensure every debit and credit is accurately recorded in the chart of accounts.
• Accountants: Perform more complex tasks such as financial analysis, audits, and preparing tax returns. They often use the organized data provided by bookkeepers to offer deeper insights. An accountant may take on advisory roles and provide strategic financial advice.

Why Choose a Bookkeeper with QuickBooks and Xero Proficiency for Your Business

• Efficiency: QuickBooks and Xero automate many routine tasks, saving time and reducing errors. This efficiency helps businesses maintain accurate records.
• Real-Time Data: These platforms provide real-time financial data, allowing for quicker and more informed decision-making.
• Integration: QuickBooks and Xero integrate with other business software, making it easier to manage all aspects of your business from one place. This integration is crucial for a full-service approach to financial management.
• Compliance: They help ensure compliance with financial regulations by providing tools for accurate record-keeping and reporting.

Key Takeaways

1. Manage Financial Records: Bookkeepers work to record all financial transactions, ensuring accuracy and organization in the business’s financial records.
2. Track Income and Expenses: Bookkeepers make it easier to monitor and categorize income and expenses, providing a clear picture of the business’s financial health.
3. Reconcile Accounts: Bookkeepers work to reconcile bank statements with the business’s records to identify discrepancies and maintain accuracy.
4. Prepare Financial Statements: Bookkeepers make essential financial reports, such as profit and loss statements, balance sheets, and cash flow statements, for business analysis and decision-making.
5. Assist with Tax Preparation: Bookkeepers work to ensure all financial records are up-to-date and organized, making it easier to prepare for tax season and comply with tax regulations.

How can Taxfyle help?

Finding an accountant to manage your bookkeeping and file taxes is a big decision. Luckily, you don't have to handle the search on your own.

At Taxfyle, we connect small businesses with licensed, experienced CPAs or EAs in the US. We handle the hard part of finding the right tax professional by matching you with a Pro who has the right experience to meet your unique needs and will manage your bookkeeping and file taxes for you.