What does a bookkeeper do? Guide to Bookkeeping Basics
Posted on June 29, 2023
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For small business owners, especially sole proprietors, simplicity can be the key. This is especially true if you’re leveraging online platforms for tasks like tax filing, where having organized bank statements and expense receipts can streamline the process. Although accounting and bookkeeping are distinct disciplines, they are what exactly does a bookkeeper do intricately interwoven, working collaboratively towards ensuring financial clarity. Bookkeepers play the role of the data collectors, meticulously noting down every financial piece of information. With a keen eye for detail, bookkeepers shoulder the responsibility of recording each financial transaction a business undergoes.
If the data is incomplete or contains errors, you’ll have to amend the returns, which may result in interest and penalties. To understand the importance of bookkeeping, think about your company’s stakeholders. Investors, creditors, vendors, and regulators need accurate financial records regarding your business. Accountants use the records a bookkeeper provides and their own expertise to help build budgets, assess finances, and make business decisions. So, generally, an accountant’s role requires more education than a high school diploma. Accountants may have a bachelor’s degree in finance and training in bookkeeping roles.
What Does a Bookkeeper Do?
As your business grows, your small transactions also increase. If you’re posting more transactions each month, entering data can make bookkeeping more difficult. Every business should use the double-entry bookkeeping method. This concept is important because each accounting transaction impacts at least two accounts. Using the double-entry method, you can get a clearer picture of your business activity. And when it’s time to post a journal entry to your accounting system, the double-entry method accounts for debit entries, credit entries, and totals.
What’s better is that their assistance can also often save you money on small business tax preparation. If your primary focus is on organizing your financial data and maintaining a clean record of your transactions, bookkeeping might suffice. For instance, a cash flow statement can provide clarity on your business’s liquidity, offering insights into investment opportunities or potential pitfalls.
Bookkeeper responsibilities
Track your expenses to maximize tax deductions for things like business mileage. Before we dive deeper into the question at hand—What does a bookkeeper do? This website is using a security service to protect itself from online attacks. The action you just performed triggered the security solution. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data.
Read on to learn more about bookkeeping, the steps to get started, and why it’s important to your business. From big jobs to small tasks, we’ve got your business covered. Let’s take a look at some of the typical responsibilities of a bookkeeper. It’s crucial, however, to have a clear understanding of your finance process, to determine the extent of expertise required. Scan and attach receipts to a transaction to eliminate paper files and stay organized for tax season.
steps for basic small business bookkeeping
The accrual method matches revenue earned with expenses incurred to generate the revenue, which presents a clear picture of company profit. If you’re thinking about hiring a bookkeeper for your business, you should consider these qualities when evaluating prospective providers. With FinancePal’s bookkeeping services, you’ll have top financial experts equipped with leading technology handling your books.
- For small businesses, these reports are vital, often serving as the primary financial insights that guide decision-making.
- Accountants can do bookkeeping but it’s generally better to separate the two categories for small businesses.
- Bookkeepers and accountants can work together but they have different skills.
- Every business creates a chart of accounts—or a list of each account needed to manage the business and a corresponding account number.
- In addition to bookkeeping, FinancePal provides small business payroll and tax services that are tailored to your needs and easily accessible online.
Critical financial decisions get made based on the different approaches. And the results from accounting and bookkeeping efforts blend together to make your business more efficient. Read stories from three business owners and discover how QuickBooks Live Bookkeeping provided a boost for their small business.
Let’s say your HVAC company serviced a customer’s air conditioning system recently. Your bookkeeper may help you generate the invoice, collect a payment, enter the transaction into the general ledger, and document the paid invoice. As a business owner, one of your primary responsibilities could be keeping tabs on your product inventory and restocking it when needed. When you order inventory, your bookkeeper collects the receipt, enters the transaction into the general ledger, and files the record into your financial database. When you search for “what do bookkeepers do”, you’ve likely come across many articles that mention both bookkeepers and accountants—that can get kind of confusing. Let’s break down the key differences between what a bookkeeper does and what an accountant does.
If you were to ask someone to explain the difference between bookkeepers and accountants, they’d likely say they’re the same. People often talk about these two professions interchangeably. But there are key differences between them that you’ll want to note before hiring a bookkeeper or other financial professional. While our Basic Plan is perfect for start-ups, our more comprehensive plans are well suited for businesses that are expanding.
