Your guide to small business bookkeeping
Discover what is bookkeeping and the bookkeeping basics for your small business.
What is bookkeeping?
Put simply, bookkeeping is the process of recording, analysing and interpreting the financial transactions of a business or individual. Small business bookkeeping is an inescapable element of running your own well managed small business. Some small business owners are more than capable of performing their own small business bookkeeping and forgo the professionals and advisory services. Read the article to find out what is bookkeeping and the bookkeeping basics for your small business.
Why is bookkeeping important for a small business?
As your new business begins to turn over cash for the first time, you’ll begin to consider when to hire a bookkeeper to help manage your ever-increasing accounting admin. To ensure your small business is afforded the best chance of success, it’s time to understand why you need bookkeeping services. Read the article to find out why bookkeeping is important for a small business and why you should consider to hiring a bookkeeper.
What is the difference between accounting and bookkeeping?
Day-to-day bookkeeping is a fundamental and unavoidable aspect of owning your own business. You can always choose to undertake the burden of day-to-day bookkeeping yourself. However, you’re often better served enlisting a dedicated bookkeeper or accountant to perform bookkeeping tasks on your behalf. Read the article as we delve into the importance of bookkeeping and accounting to better understand the respective value they bring to a business.
Small Business Bookkeeping FAQs
How will a bookkeeper help your small business?
Here are some ways a bookkeeper will help to keep your business running smoothly:
Keep you compliant
As a small business owner, you’ve got enough to worry about without having to stay up to date with all the legislative compliance changes. That’s exactly how your bookkeeper can help; it’s their job to know about industry updates and compliance changes so you don’t have to. Bookkeepers stay aware of changing laws, so they can ensure your small business is compliant with payroll and tax laws, as well as any other financial rules and regulations that affect your small business.
Help you learn about your business numbers
A great bookkeeper is someone who doesn’t mind sitting down with you and running through the “ins and outs” of all things bookkeeping. They will take the time to explain your business numbers, show you the insights behind them, provide suggestions, tips of the trade and answer your questions without any accounting jargon.
A bookkeeper also keeps track of your company’s financial health and advises you on decisions that can help you grow your business. They can also warn you if you’re about to make a decision that could hinder your longer-term growth.
For more details on why it’s important to hire a bookkeeper, read out article here.
What are the main responsibilities of a bookkeeper?
Bookkeepers oversee a company’s financial data and compliance by maintaining accurate books on accounts payable and receivable, payroll, and daily financial entries and reconciliations. They perform daily accounting tasks such as monthly financial reporting, general ledger entries, and record payments and adjustments. Additionally, many bookkeepers also assist with basic HR duties like new hire documents, compliance, and temporary disability insurance and workers’ compensation filings, making them an indispensable part of an organization’s fiscal fitness.
A bookkeeper’s main responsibilities include:
- Maintains records of financial transactions by establishing accounts; posting transactions; ensure legal requirements compliance.
- Develops system to account for financial transactions by establishing a chart of accounts; defining bookkeeping policies and procedures.
- Maintains subsidiary accounts by verifying, allocating, and posting transactions.
- Balances subsidiary accounts by reconciling entries.
- Maintains general ledger by transferring subsidiary account summaries.
- Balances general ledger by preparing a trial balance; reconciling entries.
- Maintains historical records by filing documents.
- Prepares financial reports by collecting, analyzing, and summarizing account information and trends.
- Complies with federal, state, and local legal requirements by studying requirements; enforcing adherence to requirements; filing reports; advising management on needed actions.
- Contributes to team effort by accomplishing related results as needed.
Do you need a bookkeeper if you have an accountant?
Contrary to popular belief, accountants and bookkeepers perform distinctly different tasks for the businesses they serve. Bookkeepers are responsible for on-going maintenance of their clients’ general ledgers. A bookkeeper’s common responsibilities consist of:
Compiling data on a daily basis
Categorizing expenses in the general ledger
Reviewing the general ledger for accuracy
Reconciling bank statements against the general ledger
Generating financial statements
Accountants use the accurate and up-to-date general ledger maintained by the bookkeeper to provide advisory services, such as:
Analyzing the company’s financial data
Preparing income tax returns
Providing tax planning advice
Read our article about the key differences between a bookkeeper and an accountant.