What Does A Bookkeeper Do And Why Is It Important To Have A Bookkeeper?
What Does A Bookkeeper Do And Why Is It Important To Have A Bookkeeper?
Running a business while keeping the cash flow positive requires responsible and timely management of your accounts. You have to keep track of your day-to-day
operational expenses, cash inflows, and cash surplus. To ensure you have smooth
administration of all your cash flows, hiring a bookkeeper makes sense.
A bookkeeper helps manage the cash flow of your growing business, ensures you stay tax compliant, get funded, and save time and energy. Bookkeeping is a universal part of your business; you shouldn’t avoid it if you want to keep your finances in check and improve the financial health of your company.
If you are still confused about whether to shell out your hard-earned business dollars to a bookkeeper, read this guide. We’ll walk you through all the reasons to convince you.
But first, let’s learn about bookkeeping basics.
What is bookkeeping?
Bookkeeping is the process of tracking all financial transactions a business makes. It provides an in-depth look at expenses and revenue in the form of documentation.
Documents can be made using a manual journal, a Microsoft Excel Sheet, or bookkeeping software, depending on the company’s accounting principles.
Bookkeeping documentation includes bills, receipts, invoices, purchase orders, or other records of transactions. It’s much more than numbers and spreadsheets, and it paves the path to transforming your business into a money-maker.
There are two aspects of bookkeeping: single-entry and double-entry bookkeeping.
In single-entry, bookkeepers can log profits and expenses for all expenditures in a cash register.
In double-entry, bookkeepers first make a journal, then a ledger, a trial balance, and
lastly, financial statements.
In short, bookkeeping is a meticulous art of keeping good financial records to move
businesses toward heightened profits, growth, and success.
Why is bookkeeping important?
If you want to have an accurate indicator of the measurable success of your business,
you must make strategic cash flow plans and develop realistic objectives. Bookkeeping allows you to keep adequate records of cash inflows and outflows and create accurate financial reports with a forecast for future growth.
Here are some compelling reasons hammering the importance of bookkeeping for your business.
1 -Helps in accurate budgeting
BookkeepingBookkeeping makes budgeting so much easier because you have a properly organized report of your income and expenses in front of you. You can review your financial resources, costs, and surplus cash and budget accordingly to create a financial roadmap for your business. On the flip side, if you don’t keep books accurate and updated, there’ll only be guesswork in budgeting.
2 -Meeting Federal Government Regulations
Additionally, as a business owner, you must comply with the legal regulations of the IRS that govern your finances. Some standard bookkeeping documentation that you should provide to the federal government include:
- Financial transactions
- Financial statements
- Tax compliance
- Cash flow reports
To accurately maintain all these reports, you need efficient bookkeeping. It sets a firm
footing for all levels of government compliance.
3 -Evaluate efficiency
Well-organized bookkeeping can help you evaluate even those areas of your business that may be more or less profitable and have the potential to be optimized. By diving into your books, you can focus on not only the top-line revenue but also a particular segment of your products that produces a higher profit margin. Hence, bookkeeping won’t let you leave any opportunity on the table and contributes to your company’s success.
4 -Bookkeeping measures Key Performance Indicators (KPIs)
Every business owner should know its business KPIs; how much you sell your
product/service for, costs of production, labor cost, and indirect costs like credit card
fees and facility expenses. Without tracking your KPIs, your measure of profitability
could be skewed. Bookkeeping allows you to know the amount of money spent in each expense category and make data-driven business decisions considering all the
financials.
5 -Audit assurance
If your firm receives notice of being audited, bookkeeping will minimize the stress of the audit process. You can rest assured of all your turnovers and financial records. If your finances are not well-kept, the average audit process will consume an additional 60+ hours of your bookkeeper’s time.
6 -Keeps you prepared for tax
Filing your taxes at the end of the tax year is intimidating if you don’t have an accurate
record of all the financial information. With a bookkeeping process in place, you’ll have the record of transactions – when payment went out and came in. If your books are updated, you can calculate any tax due and will have your financial information ready for tax season.
What does a bookkeeper do?
A bookkeeper provides accurate, up-to-date financial information to business owners and managers and keeps the company’s finances intact. Some bookkeepers are also
involved in strategy development that helps business owners to keep the business financially sustainable.
Whether performed manually or via software, a bookkeeper is responsible for performing the following tasks:
● Completing data entry
● Maintaining Ledgers
● Invoicing processing
● Completing payroll
● Tracking and managing inventory
● Handling accounts payable and receivables
● Sharing investment or business advice
● Preparing for tax returns
● Use bookkeeping software, spreadsheets, and other databases to create
financial reports.
● Maintaining financial records for accuracy and reconciling discrepancies in
financial statements.
What are the benefits of having a bookkeeper?
Once you understand the day-to-day responsibilities of a bookkeeper, you should know
how he performs these tasks and translates them as benefits for your business.
Following are some of the perks of having a bookkeeper for your business.
1 -Time savings
As a business owner, you have multiple things to manage and bookkeeping alone can
eat up most of your energy and time. A bookkeeper can take on your tasks, including
but not limited to collecting and recording transaction data, classifying expenses,
invoicing customers, chasing late payments, sorting receipts, and managing payroll. If
you’re good at bookkeeping, you still need help to complete these activities. In this way,
you can save plenty of time you used to spend each week managing your books.
Think of the time you spend and the pressure you have during tax season. A
bookkeeper can save a lot of your valuable hours, which you can spend on other
activities like perfecting your products, finding more business opportunities, or spending
time with family.
2 -Meeting Federal Government Regulations
Additionally, as a business owner, you must comply with the legal regulations of the IRS that govern your finances. Some standard bookkeeping documentation that you should provide to the federal government include:
- Financial transactions
- Financial statements
- Tax compliance
- Cash flow reports
To accurately maintain all these reports, you need efficient bookkeeping. It sets a firm
footing for all levels of government compliance.
3 -Money savings
We all agree with the phrase that time is money. Each time you spend doing your own
books costs you money. How? In the form of missed opportunities. A bookkeeper will
give you relaxation and peace of mind, which is vital to creating or taking advantage of
new business opportunities. They can also advise you on whether you’re in a fiscal
position to explore new possibilities.
4 -Helps you avoid costly financial mistakes
You might be a great entrepreneur, but chances are you are not good at accounting.
Even if you are trying to handle your business’s finances, cutting your costs, and saving
your bottom line, you could face a business disaster. Because doing your own
accounting often doesn’t save you money, it might be hurting the bottom line that you
can’t see.
You could be losing money every year by trying to do the bookkeeping job all by
yourself, from incorrect invoicing, double payments to vendors, or other data
entry/clerical errors. Having a professional bookkeeper on your side is financially
practical; you can save thousands of dollars that you could be losing from making
financial mistakes you were unaware of.
5 -Maximize your tax benefits
Your business is taxed differently from individuals, and your business may be subjected
to a tax benefit for certain expenses, like utilities, phone and internet bills, travel
expenses, etc. Despite being the most orderly person or a smart entrepreneur, you
could overlook one or two benefits that you can take advantage of.
An expert bookkeeper is more knowledgeable about the tax exemptions and rules that
apply to your business. He can provide insights regarding your returns during tax
season and collaborate with a CPA to assure your business is in the clear. Moreover, A
bookkeeper will give your business a safety net for financial challenges and also protect
you from internal issues, including but not limited to employee fraud or theft.
6 -Helps you build your business credit
If you are a small business owner, you may face difficulties securing loans from banks
and lenders because small entrepreneurs are often considered riskier clients. Yet, you
need to secure a mortgage or business loan to build your business credit. A bookkeeper
makes detailed documentation of your transaction activities and the future potential of
your business, which helps you secure loans quickly.
7 -Making informed decisions
As a business owner, you have to make crucial decisions to improve your company’s
financial health. A bookkeeper will give you the confidence to make decisions, such as
submitting grant applications, building lines of credit, or hiring employees easier. A
bookkeeper can evaluate the concrete information to determine if your business is
financially stable to make new investment decisions.
8 -Getting investors
Businesses need funding to grow and succeed, which can be in the form of owner’s
equity, grants, investors, and business loans. If you don’t have accurate accounting
records, you wouldn’t be able to compel investors to trust you. You have to show them
that your business has growth potential and that their investment will be profitable for
them in the long term. A bookkeeper provides your investors with all the information that
will be readily accessible that helps them gauge if your business can quantify the value
of their investment or not. Clear and updated financial statements, including the balance
sheet, cash flow and income statement, will contribute to a good value of your business.
Moreover, a bookkeeper helps you get new investors and maintains relationships with
current investors. With organized financial records, your existing investors will be able to
decide to continue investing or back off.
9 -Experience matters
A bookkeeper is an expert at managing your business’s financial transactions and
provides suggestions to improve your cash flow. They’ve worked with different
entrepreneurs and spent time developing their skills. They’ve resolved
bookkeeping-related issues, and their past experience can be beneficial for your
business in terms of moving through those issues and other business challenges.
10 -You learn in the process
Working with a professional bookkeeper will help you learn a lot more about your
business’ finances which can be beneficial for making smarter decisions. Your
bookkeeper not only enables you to maintain accurate records, but they also help you
identify trends in your industry, assess if now is an excellent time to grow or when you
should hold back, and when to take advantage of opportunities.
Finally, they’ll help you devise a realistic financial plan to achieve short- and long-term
goals.
11 -Brings you peace of mind
Knowing that a professional is monitoring your company’s cash flow and understanding
your company’s fiscal health can make a big difference in your bottom line. Hiring an
experienced bookkeeper will give you peace of mind and freedom from the stress of
managing your cash flow, and you will be able to focus more on expanding your
business.
Hire a Bookkeeping expert to keep your company's books accurate and precise
If you think the idea of shelling out your hard-earned money into someone else’s hands
is off-putting, it is not! A professional bookkeeper will sign an NDA to not disclose your
company’s financial information ever. Moreover, you will get assistance with other
aspects of your company’s cash flow as your company scales in size.
So, if you are looking for bookkeeping support, call KKE for advice today. KKE is
Certified in QuickBooks Desktop and Online Software. She specializes in Construction,
Retail and Service companies and can help with A/R, A/P, Payroll Services, Financial
Statements, Inventory, and Job Costing.