What Is a Bookkeeper?
Are you a business owner wishing to hire a bookkeeper? If yes, you would first want to know what a bookkeeper is and if they will be any good for your business.
Or maybe you wish to pursue a career as a bookkeeper but want to learn about what your job responsibilities will be?
If your answer is a "yes" to either of the questions, you are in the right place. This article will give you comprehensive know-how of what a bookkeeper is and what their job duties are. Let us dive right in and get to know about being a bookkeeper in further detail.
What Is a Bookkeeper...
A bookkeeper is responsible for recording your small business's financial transactions, including the following.
- Purchases and other expenses
- Incoming sales revenues
- Any payments
The bookkeeper essentially manages the day-to-day records, tracking your business expenses, and managing accounts receivable/accounts payable.
Moreover, the bookkeeper also maintains records of these transactions into general ledgers. You can use these records later to produce income statements and balance sheets. However, many people make the classic mistake of confusing a bookkeeper with an accountant. Let us see what sets these two roles apart.
Accountant vs. Bookkeeper
If someone asks you what is a bookkeeper and how they are different from accountants or CPAs, here is what you can tell them.
A Bookkeeper is an administrative employee who handles the task of noting down and maintaining records of your small business's daily financial transactions. On the other hand, an accountant offers you insight into your financial standings based on the information recorded by the bookkeeper.
In simpler terms, your bookkeeper prepares the groundwork for your accountant to analyze and prepare the financial information of your business.
A bookkeeper can use a manual data record entry system or accounting software to record incoming and outgoing financial transactions. Moreover, they are well-versed in using basic data processing tools to prepare in-house financial reports.
What Does a Bookkeeper Do
If you are wondering what bookkeeping services there are, continue to read.
Assistance with Cash Flow
Most businesses fail due to the common problem of cash mismanagement. A bookkeeper works to keep you updated on your current cash flow statements and provides you with a forecast for future cash flow conditions.
Educating Your Bookkeeper About Your Bookkeeping System
You can always have a one of one meeting with your bookkeeper and go through the figures together. This will also help you understand the "what is what" of your bookkeeping system.
Filing Your Returns
It is common for businesses to miss out on the dates of filing their returns or completely forgetting about them. Your bookkeeper will not only remember the dates but make sure that your business files for returns on time.
These returns include
- Filing for VAT
- Filing for PAYE
- Corporation Tax
- Annual accounts
- Self-assessment accounts
- Liaison with the Accountant
Your accountant prepares your annual account report at the end of each year. On the other hand, your bookkeeper will calculate and compile your business' corporation tax payment report. The bookkeeper will provide these and other records to the accountant. Moreover, he will also answer any questions and clarifications the accountant needs for any specific transactions.
Dealing with IRS
Your bookkeeper will deal with Internal Revenue Service (IRS) on your company's behalf. A bookkeeper will also assist you with any auditing or inspections. As the person in charge of preparing your in-house accounts, your bookkeeper will be the best person to speak to the authorities and answer any questions.
Spare You Time and Energy
As a business owner, you would like to focus on more productive areas of your business than spending your time and energy on bookkeeping full-time or part-time. That is why a business needs a bookkeeper. Even if you like to do everything by yourself, bookkeeping requires specific skills, and it is best to leave it to a professional bookkeeper.
Hiring a bookkeeper will save you valuable time. This becomes even more beneficial if you are starting a business. Even if you know the basics of bookkeeping, hiring a proper professional bookkeeper can help you avoid any critical errors. Getting a virtual bookkeeper can save you a lot of hassle and stress.
Helps You Save Money
Have you been keeping financial data records in a hazardous manner by stuffing them in a box? Or have you been entering them into a book without any organization system? Either way, this can cause a lot of hassle and errors when you try to do your financial reports.
Most importantly, these errors and missing records can cause your business to fail the compliance and receive hefty fines. Companies make the classic mistake of hiring an accountant who charges a high fee or hourly rate to maintain financial records or try to do their own bookkeeping.
The worst part is that you will be responsible for providing and managing all the records, and the accountant will only organize what you give them.
On the other hand, a bookkeeper will save you money as an employee. The best part is that they will do all the legwork of keeping track of all your business's finances, spending or daily transactions, bank account financial reports, and bookkeeping needs. Moreover, your bookkeeper will also help generate income and financial reports as and when you need them.
Preparing Financial Reports
A bookkeeper will prepare small business owners' weekly, monthly, and quarterly financial reports. This will help you track all your incoming and outgoing daily transactions in chronological order. The same basic bookkeeping reports include balance sheets, credit card records, aged creditors or aged debtors, debits and credits, and records on all profits and losses.
Producing Comprehensive Management Accounts
A bookkeeper is also responsible for producing extensive management accounts of your business. These accounts are basically extensions of your regular financial reports offering drilled down information. For example, you can ask a bookkeeper to produce management accounts for bestsellers or most profitable products.
You may also be able to compare your financial reports from previous months and years. A detailed management account report will show you the results of each month for a full year. This insight in a glimpse will help you save a lot of time and energy instead of digging through a plethora of organized records.
Most importantly, you will be able to make informed business decisions based on all this valuable data by your bookkeeper.
How to Become a Bookkeeper
If you are thinking about becoming a bookkeeper, this section will give you basic knowledge of where to get started. Bookkeepers usually need post secondary education along with other basic skills to perform their job duties. These include basic knowledge and skills in computing and mathematics. Moreover, you must be good at using spreadsheets and other bookkeeping software.
Educational Requirements to be a Bookkeeper
Apart from postsecondary studies, you must know the basics of accounting. Ideally, a degree in accounting will do, but some companies may even hire if you have a high school diploma and not a bachelor's degree.
As a bookkeeper, you may usually get training when a company hires you. You will be working under the supervision of a senior employee and learning the ropes. If you are working for a complex business, you may also learn about double-entry bookkeeping, where you enter a single transaction in two different records.
For example, if you purchase an item for business, you will enter it into a debit account (for spending) and once in a credit account (asset record) for a newly purchased item.
What Certifications or Registrations You May Require
You can earn licenses, certification, or registrations to become a certified bookkeeper just like becoming a certified public accountant. In case you do not have any postsecondary education, certification can help you circumvent your way to become an expert bookkeeper.
American Institute of Professional Bookkeepers (AIPB) awards "Certified Bookkeeper" (CB) certification to show that you have all the necessary knowledge and skills to be a bookkeeper. These also certify you to handle tasks such as balancing accounts, overseeing payroll, etc.
The National Association of Certified Public Bookkeepers awards a certification known as Certified Public Bookkeeper (CPB). For this, you must pass the four-part examination.
Other Skills You Will Require as a Bookkeeper
As much as knowing your accounting skills is a must, you will also require certain additional skills to be a proficient bookkeeper in 2021. These qualities include the following.
- Computational Skills – As a modern-day bookkeeper, you must be skilled in using computer programs such as bookkeeping software and spreadsheets, etc.
- Attention to Details – one of the most important duties of your job as a bookkeeper will be to generate accurate financial records. Therefore, you have to be detail-oriented. This is absolutely crucial in order to avoid any errors and/or recognizing them while you are sorting out old financial records.
- Good at Documentation – you must be good at producing detailed organizational financial documentation. This is vital to generate transparent records and guard the company's record against any malicious intent.
- Mathematics - This is the most basic and critical skill for any bookkeeper. You have to be great with numbers. That said, bookkeeping usually deals with basic arithmetic.
Now you know what a bookkeeper is. Stop trying to do a bookkeeper's work. If you are a small business owner looking to hire one, it is important to consider a certified candidate. This will ensure that your company's financial records are in good hands and your tax preparation to be smooth. Moreover, you will also get peace of mind for never falling short on compliance and regulatory laws.