The Syllabus of a Bookkeeper
“Beware of little expenses; A small leak will sink the ship.”
Whether you make apps for a living, manage a dental practice, or own a consulting firm, there are two constants that run your business; inflow and outflow of your cash. How much money you earn, and where you must spend it is best tracked as well as advised by a bookkeeper.
If you’ve been striving to get your own venture started, then you’ll have a fair understanding of the roles and duties of a bookkeeper. We’ll tell you, in this blog, what exactly a bookkeeper does and how indispensable a good bookkeeper is to any business.
Who is a bookkeeper?
According to the orthodox definition of a bookkeeper, a bookkeeper is usually employed to record sales, purchases, payroll, collection of accounts receivable, payment of bills, etc of a company. In short, a bookkeeper is the one employed to document a company’s daily transactions.
Is a bookkeeper the same as an accountant? Or, is she not?
A bookkeeper records transactions on a daily basis in a consistent and honest fashion. A bookkeeper’s role is a key component of building a strong business, and it requires niche skills. However, there are a few financial tasks that a bookkeeper isn’t skilled to do, but an accountant is. While a bookkeeper records daily transactions, an accountant analyses the transaction to advise the company on its future finance path. While bookkeeping is simply transactional , accounting is largely analytical and advisory. Accountants help a company see the bigger picture, while a bookkeeper is implemental in putting together the ground work for the analysis of the bigger picture.
Bookkeepers
Mainly objective – a few tasks include identifying, tagging, and recording financial transactions
Financial decisions cannot be made based on the data derived from a bookkeeper
Main documents that a bookkeeper uses or creates include ledgers and journals
Requires transactional skills
Accountants
Mainly subjective – a few tasks include summarizing, and analyzing financial transactions
Financial decisions can be made based on the information and analyses gathered from an accountant
Main documents that an accountant uses or creates include balance sheets, profit and loss statements, cash flow statements, etc.
Requires analytical skills
A day in the life of a bookkeeper
A bookkeeper’s regular day includes a large chunk of data entry, and a fair bit of receipt handling. Largely speaking, a bookkeeper records expenses, labels them, indicates who you paid and how much you paid, and issues receipts. Also, they track inflow of payments, and issues invoices. However, bookkeeping is a lot more than recording numbers and calculating figures. On a daily basis, a bookkeeper –
Records daily financial transactions
Processes invoices, payments, and receipts
Processes payrolls
Prepares financial statements
Reconciles multiple accounts and generates reconciliation reports
Equips accountants with the financial data they need to analyse the company’s finances
Maintains annual budget
Reports deviations and variations as and when they pop up
A bookkeeper is responsible for preparing the following financial documents also –
Income statements – a statement of profit and loss
Balance sheets – a summary of the company’s financial position
Cash flow statements – record of cash coming in and leaving the company’s account
Statements of changes in equity – a crisp report of how the share capital, reserves, and retained earnings have shaped over a period
Why must you have a good bookkeeper?
If a bookkeeper’s task is simply transaction while an accountant is responsible for the larger picture, why must you have a good bookkeeper at work?
A good bookkeeper will make good budgeting decisions, having the knowledge of where exactly the cash is being spent
You will have good nights’ sleep knowing your books are in order taxes will be a breeze
Good bookkeeping will audit-proof your business
You can focus better on your business because you have someone able handling your books at work, a crucial part of your business
An accountant can analyse your business well only when a bookkeeper has done his job right
A good bookkeeper will help you understand the key metrics of your business well – revenues, costs, incomes, profitability, etc.
How would a good bookkeeper do good to your business?
Know your company’s financial health well
If your numbers are not calculated correctly and updated regularly, how would you know if your business is making profit? Monitoring inflow and outflow of cash is crucial in planning your company’s future. Thinking ahead, if and when you plan to sell of your company or pitch for investment capital, it’s important to have a clear and honest documented financial history of the company to help in its valuation.
Save time while filing
It’s known to all how time-consuming is the process of filing one’s taxes. Many of us scuttle around to do the paperwork that has been pending since the last year. The hassle can be avoided if a good bookkeeper takes care of your business and records transactions as they happen.
Don’t miss deductions
Deductions are every investor’s or a company holder’s breath of fresh air. Availing deductions wherever applicable is a smart way to do business. An inefficient bookkeeper will tend to overlook legitimate tax deductions, and therefore not dig the hole that would have yielded gold. Have a good bookkeeper who’s good with the books and make the most of your legitimate deductions.
Cut down on painful audits
When your company is audited, only clean and updated books can save you the pain of a harassing audit. A good bookkeeper will ensure your company’s numbers are updated regularly, expenses tagged, inflow and outflow of cash recorded, and ledgers and journals clean and clear. Only in the case of an audit, would you realise the worth of a good bookkeeper!
Plan your business better
You’d only need your company’s balance sheet and profit and loss statement to assess how your company is fairing financially. Knowing your company’s financial status will help you to plan your business easily, besides allowing an accountant to create the company’s analytics report too from the data.