Bookkeeping is essential not only to track the financial position of your business entity but also for its regulatory compliance.
It takes a lot of time and effort in building and maintaining bookkeeping and accounting records. So, to help you maintain your books of accounts easily, chartered accountants need to provide an extensive array of accounting and bookkeeping services.
Let’s understand what is bookkeeping service, what does a bookkeeping service do, and how bookkeeping service benefits your business.
What is a Bookkeeping Service?
Bookkeeping service is the practice of recording and keeping track of financial transactions of your business. The bookkeepers are required to summarize the activity of your business regularly into financial reports. These reports showcase the financial position as well as the performance of your business.
Besides maintaining financial records, bookkeeping services also include:
- preparing tax returns
- monitoring performance indicators
- cleaning up books of accounts
- maintaining accounts receivable and accounts payable
- reconciling financial statements with bank statements
- undertaking budgeting or cash flow analysis
- management reporting
However, it is important to note that bookkeeping service differs from accounting service. Bookkeeping relates to maintaining day to day financial records. Thus, bookkeepers collect financial information with the help of which financial statements or books of accounts are prepared.
Accounting, on the other hand, refers to preparing, reporting, analyzing, and summarizing financial data collected by bookkeepers. The accounting reports give a snapshot of the financial position as well as the performance of your business.
Typically, the bookkeeping follows a double-entry system in which every transaction or event is recorded at least in two different nominal ledger accounts.
What does a Bookkeeping Service do?
It is the responsibility of a bookkeeper to provide accurate, up to date financial data so that the accountants can prepare annual financial reports as well as tax returns for your business.
These accounting reports are used by you as a business owner as well as other stakeholders such as managers to help them make business decisions.
Let’s have a look at some of the primary as well as secondary bookkeeping services that a bookkeeper can provide to your business:
Data entry is nothing but the procedure to record financial transactions, that is, maintaining a record of what comes in and what goes out of your business. It is the foundation of bookkeeping and accounting services as accurate financial data is a must for preparing financial statements. This is because accurate financial records will help you as a business owner and other stakeholders to get a true and fair view of how your business performs.
Bank reconciliation refers to the process of comparing the financial transactions in your books of accounts against the transactions reflected in your bank statements. The intent behind undertaking bank reconciliation is that the financial transactions recorded in your books of accounts must match with those reflected in bank statements. Bank reconciliation is important for your business as it helps to find and correct data entry errors or overlooked transactions.
Accounts Receivable, Accounts Payable and Payroll
A bookkeeper ensures that your customers are invoiced and payments are collected from them on time. Besides this, he also ensures that any outstanding bills to suppliers are paid on time without running out of cash. He ensures that bills are paid on time so as to avoid any delay in deliveries or holding back of supplier credit.
In addition to maintaining accounts payable and accounts receivable, a bookkeeper also undertakes payroll services. This involves calculating employee salary, adjusting deductions, and ensuring that the net salaries are paid to the employees on the required due date. Timely payment of salaries would ensure that your employees are happy. Also, proper payroll is important from the point of view of compliance.
Monthly Financial Reports
There are different financial reports that a bookkeeper needs to create every month in order to track your business performance. Some of these financial reports include:
- balance sheet – a statement that reflects the current financial position of your business
- profit and loss – a statement that keeps a track of earnings and expenses and reflects whether your business is profitable or not
- cash flow statement – a statement that records all cash transactions and showcases the amount of cash-in-hand the business has.
- accounts receivable – a statement that reflects the debtors or the amount that needs to be collected from customers as well as when such receivables are due.
- accounts payable – a statement that reflects the creditors or the amount that needs to be paid to suppliers as well as when such payments are due.
These reports indicate whether your business is profitable or not and whether it has sufficient cash in hand to meet its day to day operations. If such reports are not maintained accurately by the bookkeeper, it can impact your business forecasts, customer payment terms as well as your business spending.
How A Bookkeeping Service Benefits Your Business?
One of the most important decisions that you make as a business owner is to hire a bookkeeping service for your small business. There are innumerable benefits of taking bookkeeping services:
Ability to Concentrate on Core Operations
As a business owner, you are overburdened with the core operations of your business such as marketing, production, and customer relationship management. Due to this, you are unable to spend time on tracking expenses, processing payroll, and paying invoices in a timely manner. However, a bookkeeper can undertake all these activities on your behalf so that you get more time to grow your business.
Compliance With Regulatory and Statutory Laws
A bookkeeper ensures that you always comply with the legal regulations concerning business and accounting. Furthermore, he will also ensure that your accounts and books are up to date in case there are any changes in the laws. This saves you time as you do not have to go into the details of knowing the laws yourself.
One of the most important aspects of your business is to send invoices to your customers and suppliers on time. This is because it enables you to maintain cash flow for your business. A bookkeeper helps you to achieve this goal by ensuring that the business receives payments faster.
Access to Accounting and Bookkeeping Software
Since, as a business owner, you do not have the expertise to use online bookkeeping and accounting software, it is always wise to hire bookkeeping services for the same. The bookkeeping software offers a host of functions such as basic financial statements like balance sheet, profit and loss, and cash flow, bank reconciliation, etc. that makes bookkeeping and accounting easy.
Be Prepared for Tax Season
If your books of accounts are up to date, there will be no stress during the tax season of putting the receipts in place and completing your books of accounts. A bookkeeper ensures that he maintains tax ready financial statements and trial balance. This also means that you will save more money and maximize your tax deductions.
Get a Clear View of Your Finances
Well maintained financial statements are a must as they help you in understanding your finances or apply for a loan when needed. Basic financial statements such as P&L, balance sheet, and expense reports give a clear and fair view of your business’s health. Furthermore, such financial statements also let you know how much your business owes, and the amounts owed to you. So, in order to get a clear view of your finances, it is important for you as a business to hire bookkeeping services.
Hiring a Bookkeeping Service
Often, there is confusion as a small business owner whether you should hire and when should you hire bookkeeping services.
Ideally, you should hire a bookkeeper as soon as you start your business. Otherwise, several months’ invoices and receipts would go unrecorded.
However, you should ensure that you hire a bookkeeper whom you can place trust in. You can take reference from your accountant for a professional bookkeeper.
Furthermore, it’s always wise to hire a bookkeeper who makes use of the same bookkeeping and accounting software as your accountant. This makes it easy for both parties to exchange information and maintain records.
In addition to this, you should also ensure that the bookkeeper provides bookkeeping services online, that is, all the financial statements can be accessed online. This way all the stakeholders including accountant, bookkeeper, and you will be able to collaborate and get access to the financial data of your business. And this can be done anytime, anywhere, and at any time.
Bookkeeping Services for Multiple industries
There are certain industries that prefer outsourcing their bookkeeping activity over hiring an in-house bookkeeper.
Here is a list of industries that typically outsource their bookkeeping activities:
Bookkeeping Services for Small and Medium Entreprises
- Real Estate
- Retail and Whole Sale
- Law Firms
- Bookkeeping Services for Insurance Companies
- Bookkeeping and Accounting for Banking and Financial Companies
- Bookkeeping Services for Chartered Accounting Firms
- Bookkeeping Services for Health Care
Bookkeeping Service for Large Firms
- Shipping and Logistics
- Construction Companies
Value-added Bookkeeping Services – Specialized Reporting
Besides offering standard bookkeeping services, a bookkeeper can also provide value-added bookkeeping services like custom reporting. These custom reports will enable businesses to analyze their expenses and revenue in a much better way.
Here’s a list of some of the customized reports that bookkeepers can provide to add value to their bookkeeping services with the help of QuickBooks online accounting software:
These reports help you in determining who are your most profitable clients. These include:
- accounts receivable aging detail
- collections reports
- customer balance detail
- invoices and received payments
- sales by customer detail
These reports help you determine employee expenditures. These include:
- recent/edited time activities
- time activities by employee details
- employee payroll
Such reports help you to divide your expenses by category. This report gives you a snapshot of your business expenses according to the category. These include:
- expenses by supplier summary
- purchases by product/service detail
- purchases by supplier detail
- transaction list by supplier