Bookkeeping plays a vital role in your business operations, but how much do you know about the profession? Let’s explore what bookkeepers do, examine some of the benefits of bookkeeping, and explore your options for using a bookkeeper.
What is a bookkeeper?
A bookkeeper is a professional who helps businesses and other organisations keep their finances in order. They manage general accounting ledgers, record journal entries (transactions), and generate financial statements.
The responsibilities you need someone to fulfil depend on the bookkeeper or bookkeeping service that your business needs. Each bookkeeping professional has their own expertise, just like each business has unique financial circumstances and bookkeeping needs.
A brief history of bookkeeping
Before we dive deeper into the question at hand—What does a bookkeeper do?—let’s review a brief history of bookkeeping.
Bookkeeping and accounting are some of the oldest professions in history. In fact, you can trace bookkeeping all the way back to ancient Italy, thanks to Luca Pacioli, the “father of accounting.”
In 1494, Pacioli published “Summa de Arithmetrica, Geometrica, Proportioni et Proportionalita (Summa).” Effectively, he introduced double-entry bookkeeping and accounting to the world. Today, many use Pacioli’s core bookkeeping and accounting principles to streamline business finances.
What does a bookkeeper do?
In the broadest sense, bookkeepers help businesses keep their finances intact by keeping tabs on different accounts, transactions, and reports. They organise, collect, and store the business’s financial records, including cash flow statements, bank reconciliations, and loss statements. Bookkeepers make it possible for business owners and accountants to build budgets, identify trends, and plan for the future. Let’s look at an example of what a bookkeeper does.
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.
Likewise, bookkeepers also help businesses keep track of their accounts receivable. Let’s say your 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.
Every business is different. How your business operates is unique, so your bookkeeping should follow suit. Great bookkeeping is a financial tool you can use to make business management easier and reach your goals as a small business owner.
So what do bookkeepers do on a daily basis? Let’s take a look at some of the typical responsibilities of a bookkeeper.
- Complete data entry and collect transaction details for incoming and outgoing bank accounts.
- Use Intuit QuickBooks’ bookkeeping software, spreadsheets, and other databases to post up-to-date financial transactions.
- Track debits (incoming dollars) and credits (outgoing dollars) for each account.
- Generate financial reports, such as balance sheets and income statements.
- Maintain and monitor financial records for accuracy.
- Reconcile or report any discrepancies in financial reports.
- Produce or pay invoices for credit card bills or inventory orders.
- Complete payroll.
- Prepare and lodge ATO GST compliance statements.
Types of bookkeeping
At this point, you could confidently answer, “What does a bookkeeper do?” You could also list their primary job duties and recognise the benefits of bookkeeping. If you’re thinking about hiring a bookkeeper or want to improve your business’s bookkeeping operations, consider your bookkeeping options.
- DIY: As a dedicated business owner, you may want to oversee daily operations. For this reason, many business owners decide to take on bookkeeping tasks. If you have a knack for numbers and organisation, this option might work for you. However, if you decide to do your own bookkeeping, it’s important to consider the time-consuming tasks and how they might take away time from other responsibilities.
- In-house professional: If you’d rather let a professional handle your bookkeeping, consider hiring a bookkeeper in-house. Depending on your needs and your budget, you could hire someone part-time, full-time or on a contract. Hiring a bookkeeper can help you free up some of your time, but it tends to be one of the more expensive avenues for small business owners.
- Bookkeeping software: For many business owners, finding a bookkeeping solution that meets them in the middle is the best-case scenario. With Intuit QuickBooks accounting software, you can access professional and easy-to-use tools that empower you to take the lead on your bookkeeping efforts.
- Remote or virtual bookkeeper: Maybe you’d rather leave the number crunching and reporting to the experts. Hiring a remote or virtual bookkeeper may strike the perfect balance for your bookkeeping needs.
Benefits of bookkeepers and bookkeeping
You know what a bookkeeper does and what their day-to-day responsibilities look like. But how do these job duties translate as benefits for your business? Great bookkeeping goes beyond refined record keeping and balanced books.
- Bookkeepers free up time in your schedule for things like building your vision, polishing workflows, and boosting your bottom line.
- Hiring a professional bookkeeper minimises the room for error. With training and experience, professional bookkeepers can help ensure you’re generating accurate financial reports and data.
- In the event the ATO audits your business, having solid bookkeeping records on hand is a huge plus. Often, the auditing process is a simple review of your records. But things can become much more challenging than necessary if your bookkeeping records are out of order.
Comparing bookkeepers and accountants
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 you’ll want to note before hiring a bookkeeper or other financial professional.
Good bookkeepers help business owners manage their finances by documenting transactions, paying and issuing invoices, generating reports, and recording accurate financial data. Bookkeepers can also present your business’s financial standing. But what do all of these figures really mean, and where do you go from there? That’s where an accountant comes in.
Accountants use the records a bookkeeper provides and their own expertise to help build budgets, assess finances, make business decisions and prepare tax returns.
Bookkeepers offer support to a number of organisations, including small businesses, non-profit organisations and corporations. They play a vital role in managing a business’s finances by documenting transactions, generating reports, and assisting with accounting efforts. When looking for a contract bookkeeper to assist your business, always ask if they are a registered BAS Agent as it is a legal requirement for bookkeepers who offer BAS related services to be registered with the Tax Practitioners Board.