Bookkeeping plays a vital role in your business operations, but how much do you know about the profession that makes mathematical magic? 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 (also known as a bookkeeping clerk) is a professional who helps businesses and other organizations keep their finances in order. They manage general accounting ledgers, record journal entries (transactions), and generate financial statements.
The responsibilities you need someone to fulfill 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 organize, 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 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.
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 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.
- File tax returns.
Types of bookkeeping
At this point, you could confidently answer, “What does a bookkeeper do?” You could also list their primary job duties and recognize 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 organization, 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 QuickBooks bookkeeping 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. QuickBooks Live Bookkeeping connects you with an online bookkeeper to assess your business finances. From tax filing help to monthly reports and more, our experts are here to help.
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 recordkeeping and balanced books. Review some of the perks bookkeepers offer your small business.
- Bookkeepers free up time in your schedule for things like building your vision, polishing workflows, and boosting your bottom line.
- Hiring a professional bookkeeper minimizes the room for error. With training and experience, professional bookkeepers can help ensure you’re generating accurate financial reports and data.
- Some bookkeepers offer tax preparation, which can be especially valuable when it comes to breaking down complex small business tax codes.
- In the event that the IRS or another entity audits your business, having solid bookkeeping records on hand is a huge plus. Oftentimes, 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 that 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, and make business decisions. Additionally, an accountant may oversee a bookkeeper’s work. 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. Of course, education depends on the individual or bookkeeping service you hire.
When comparing accountants and bookkeepers, know that an accountant may also be a bookkeeper. But entry-level bookkeepers are not accountants. Familiarizing yourself with what a bookkeeper does and what accounting clerks do can help you narrow down your financial needs.
Bookkeepers offer support to a number of organizations, including small businesses, nonprofits, and corporations. They play a vital role in managing a business’s finances by documenting transactions, generating reports, and assisting with accounting efforts.
When it comes to selecting a bookkeeping style, business owners have several options. Looking for bookkeeping support? Learn how QuickBooks Live Bookkeeping can help you streamline your bookkeeping and free up time spent on finances.