Being an entrepreneur or business owner in today’s world requires you to be a know-it-all, can do anything kind of person to run your business. Of course, things seem smooth as first, and when viewing your work from an outsider’s perspective, it seems like you’ve had everything under control.
The fact is, many people put off starting a business because of managing accounting. Numbers scare them, and to even keep up with all the taxes, payment, transaction and paperwork while running their business is a lot of work. When they decide to hire someone to tackle the hassle accounting left for them, they’re confused between hiring a bookkeeper, an accountant, or both.
Now, what is a bookkeeper? What do they do? Are they different from accountants? And do you need one for your business?
Let’s get an overview of bookkeeping so you can decide for yourself which is more suitable for your business.
What is a “bookkeeper”?
Bookkeeping is the act of organizing and classifying the financial transactions that your business makes when spending or earning money.
A bookkeeper’s primary responsibility is to keep track of all income and expenses and make sure those transactions are recorded accurately in your business’s books.
Here’s a list of things they may help you with:
Tracking down receipts from employees.
Data entry and categorizing transactions.
Reconciling bank statements.
Managing accounts payable and accounts receivable.
Sending and collecting invoices.
Depending on the type of your business, a bookkeeper can take up from a few hours of work each week or more.
If your business is service-based, like a marketing agency, you might send out 4-5 invoices each month and make a number of purchases like paying for rent and payroll for your employees. Freelance or part-time bookkeeper can keep up with these transactions easily.
But if you owned a construction company, and you need to pay for supplies and contractors every day, then that’s a different story. In addition, you need to have complex reports to track spending on each project you’re working on. Comparing to a consulting firm, the amount of work that a bookkeeper needs to do in a construction company is way more, in both volume and intensity. You’ll probably need someone who can understand the ins-and-outs of your business.
Whatever the complexity that your business has, the role of a bookkeeper is the same: to account for all the financial data and organize your books properly.
We mentioned “books” a few times already, so what do we mean by “books”?
Nowadays, almost every business has changed from traditional to some sorts of digital accounting file to store all of their financial data. Usually, it would be solutions like QuickBooks Online or Xero. A more outdated way to keep financial records is Microsoft Excel, though we wouldn’t recommend that.
An accounting file keeps all your past transaction data, which allows you to run reports on past data and keep records in case the IRS comes to you. You can say that it’s the financial database of your business. The accounting files have been referred to as “books” for a while since the terms were used when bookkeepers were still noting down everything with pencils and a calculator.