Things Bookkeepers Do For Small Businesses
Day to Day Management of Accounts
A bookkeeper can stay on top of your business’ accounts daily for all transactions. By keeping track of every sale or purchase and using software to do it all, it’s much easier for them to keep an eye on your cash flow.Plus, it saves plenty of data entry time.
Maintain Up-to-Date and Accurate Records
A bookkeeper will make sure that all of your business records are up-to-date. Plus, it’ll be their job to flag up any inconsistencies between the books and your business accounts, making sure you resolve problems quickly.
Keep Businesses Aligned With Laws
Tax can be a sensitive area. One mistake and a dreaded letter from HMRC can soon be on your way. That’s where bookkeepers come in, as they can help make sure your business stays aligned with the relevant laws. Remember, they’re here to help and not cause more significant problems.
Keep You Prepared For Tax
Like the laws and regulations, tax deadlines are quite strict as well. Doing the books is usually never the priority for many small businesses, so deadlines can slip under the radar. To keep the taxman happy and stop you from paying any additional fines, a bookkeeper will make sure your records are accurate, so you’re always prepared for tax.
Manage Bank Feeds
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.
Handle Accounts Payable
It’s usually bookkeepers who make payments on behalf of your small business. This can include anything from payment of supplier invoices, petty cash and expenses.
Send Out Invoices and Manage Accounts Receivable
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.
Prepare Financial Statements
Bookkeepers will also be responsible for preparing some significant financial statements for small businesses. These can include a profit and loss statement, balance sheet and cash flow statements. 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.
The services bookkeepers offer can vary. Some can fulfil payroll and other HR functions for small businesses. This can include assisting businesses with the processing of paychecks and tax payments to employees.
Deal With Foreign Currency Transactions
Bookkeepers also make sure to maintain accurate foreign currency accounts, utilising current exchange rates. This can be made much easier with compatible digital bookkeeping apps that can instantly analyse exchange rates without wasting much time.
For small businesses, bookkeepers also produce inventory reports by counting stock items. If there are any discrepancies, they report back to the business to make sure you can address problems quickly. It’s most commonly carried out at the end of a business’ financial year end with the figures featuring in reports such as profit and loss statements.
Keep an Eye on Cash Flow
One of the most essential tasks a bookkeeper will do for a small business is making sure they don’t run out of day-to-day money. They can do this by keeping an eye on the balance of revenues to expenses, along with offering more advice if the business needs more available cash to operate.
Preparing the Books For an Accountant
It’s a bookkeeper’s job to make sure that the accounts are valid and up-to-date when the accountant needs them. This lets an accountant use their knowledge to make business recommendations and complete any tax returns.
How do the responsibilities of a bookkeeper differ from those of an accountant?
I see a bookkeeper’s responsibilities as getting the business transactions into the company’s general ledger. This involves a tremendous amount of accuracy and persistence in first getting the information and then getting it entered. At smaller companies the bookkeeper is likely to process the payables (receiving suppliers’ invoices, verifying them, and remitting the amounts), receivables (billing customers, processing receipts, sending statements), payroll, and other tasks. In larger companies, the bookkeeper’s responsibilities are likely to be assigned to an accounts payable clerk, an accounts receivable clerk, and a payroll clerk. Generally, the bookkeeper (or accounting clerks) will not have a four-year accounting degree and will be paid considerably less than an accountant.
Accountants will review the information that the bookkeeper had entered into the general ledger, will prepare adjusting entries, will prepare the financial statements, and will analyze them. The accountant will likely supervise the bookkeeper (or accounting clerks), will be involved in the accounting system, and will review the financial statements with the management and owners of the company. The accountant will also be involved in budgeting of operations and capital improvements, cost accounting, reports to government agencies, and various analyses required by management. Generally, the accountant will have a four-year or a five-year college degree with a major in accounting.
Of course my remarks are a broad generalization. Responsibilities will vary by company and by individual.
Basic Types of Bookkeeping You Should Know
There’s a little bit of learning involved that will make getting to grips with bookkeeping much easier in the long run. To help, we’ve listed the most basic types of bookkeeping you should know below.
- Cash: The account where all business transactions pass. This is an important account that often bookkeepers use two journals, cash receipts and cash disbursements, to track the activity.
- Accounts Receivable: If your business sells products or services and you don’t collect money immediately, then you have receivables. This account tracks the money due from customers. This needs to be kept up-to-date so you can send accurately and timely invoices.
- Inventory: The account where you account for all of the products you have in stock. The numbers you have in your books should be tested by doing physical counts of inventory on hand.
- Accounts Payable: The account that allows you to see what money is leaving or has left the business – and when. This account gives you a clear view of everything you need to pay and makes sure that you don’t pay anyone twice.
- Loans Payable: The account which tracks and breaks down everything that you still owe and when payments are due for anything that you’ve borrowed.
- Sales: The account where you track all of your incoming revenue from sales transactions. This is another important account, as recording sales accurately and in a timely manner helps to know where your business stands.
- Purchases: The account where you track any materials or goods that you have bought for your business. This is a key component of calculating Costs of Goods Sold which you subtract from Sales to find your business’ gross profit.
- Payroll Expenses: The account where you track salaries and wages paid to your employees. This is often the biggest cost of all for many businesses. Keeping this accurate is essential for meeting tax and other reporting requirements.
- Retained Earnings: This account tracks any of your company’s profits that are reinvested in the business and aren’t paid out to the owners. The earnings here are cumulative, so they appear as a running total of money that’s been retained since the company started. It’s a good way of tracking how well your business has done over time.