What is Bookkeeping?
The basic accounting hierarchy begins with a bookkeeper and ends with the chief financial officer (CFO). It is common for organizations to create additional positions or layers of oversight outside this basic hierarchy. For example, large businesses may hire an assistant controller. Larger companies often have divisional, departmental, or regional accounting managers and controllers who report to a corporate controller.
As we explore these positions in the primary hierarchy, we plan to familiarize you with these roles and help you decide which is the best fit for your operation.
Laying the foundation for this hierarchy, the bookkeeper records daily financial transactions in an organized fashion. Whether you own a gas station, web design outfit, restaurant, or law firm, your bookkeeper will accurately document and categorize your daily financial activity into assets, liabilities, equity, income, and expenses.
Bookkeeping is a transactional and administrative role that handles the day-to-day tasks of recording the financial activities of your business; it represents a ‘reactive’ process. While this is not all-inclusive, below is a short list of services a bookkeeper will provide.
So, what does a Bookkeeper do?
“Books” financial transactions and keeps them up-to-date, just as the title suggests.
Collects, records, organizes, and stores a business’s financial information.
Accurately categorizes each financial transaction as an expense, revenue, liability, asset, or equity and then updates the general ledger.
Manages bank feeds and reconciles bank and credit card accounts.
Manages accounts receivable, sometimes creating customer invoices and posting customer payments.
Manages accounts payable, sometimes entering vendor bills and issuing vendor payments.
Organizes receipts, invoices, bills, and reimbursement requests.
Manages and sometimes processes payroll.
May be trained to generate financial statements, including profit & loss, balance sheet, and cash flow statements.
Assists CPA with tax filing and compliance tasks.
A bachelor’s degree or formal accounting training is not necessary.
Can work as a part/full-time employee OR contract worker.
Why OR when do I need a Bookkeeper?
When you are ready to launch your new business OR your current startup/new company quickly transitions from an idea to a formal business operation, a trained professional should keep your finances in order while you focus on building your business. Organizing your books in compliance with GAAP standards is essential if you are audited or questioned by a tax authority.
According to a Gallup poll, 39% of small business owners work more than 60 hours weekly. You’ll want to (ideally) spend this time focused on growing your business (via strategy, marketing, promotion, and funding) rather than attending to bookkeeping tasks.
Hiring or contracting a bookkeeper is highly recommended if you are not trained as an accounting professional.
Seek to understand your financial responsibilities and obligations and what you own/owe, paying bills (loans, payroll, taxes) on time, and ensuring your products and services are invoiced and reimbursed on time. You’ll also need to file/pay for any licenses and permits.
Monitor your business cash inflows and outflows.
Although one saves money by going the DIY route, a professional bookkeeper/accountant saves you more in the long run by reducing the risk of human error, missed payments/tax and loan obligations/license and permit renewals, incomplete and inaccurate receivables/payables, etc.
Seek out bookkeeping services if:
Bookkeeping is taking up too much of your time.
Bookkeeping feels like a chore.
Your books are never up to date.
Your cash flow is unpredictable.
Your sales are increasing, but profits are not.
Your books are not ready for tax-filing purposes.
Your financial statements need to be more accurate and complete.
Remember that the need for a bookkeeper can vary depending on the size and complexity of your business or personal financial situation. If you struggle to keep up with financial tasks, make errors, or lack the time to manage your finances effectively, it might be a good indicator that you could benefit from hiring a bookkeeper.
YBL provides 100% remote monthly Bookkeeping Packages and additional Client Accounting Services that can be customized into tailored packages. Remote bookkeeping can offer flexibility and convenience for businesses of various sizes and industries. Feel free to drop us a note!
