Frequently, people inquire about my role as a bookkeeper. Besides thoroughly enjoying managing your financial records, there are various primary and additional tasks that a bookkeeper undertakes. In this blog post, I will highlight some key aspects.
Book Cleanup and Catchup
If you've been running a business for some time, you've likely attempted to manage your finances independently. You might have relied on your QuickBooks Online account and diligently watched all the available training videos. Alternatively, you may have engaged a bookkeeper whose performance has fallen short of expectations (yes, bad bookkeepers do exist). However, as time goes on, you realize that bookkeeping is a specialized language that requires a distinct skill set to produce the desired outcomes. This is where a competent bookkeeper comes into play.
Bookkeepers will examine your financial records and offer a one-time service to tidy up and/or bring up to date your records to ensure they are in good condition. Usually, this is carried out for the current year's records, but in certain cases, multiple years of cleanup may be necessary if the owner requires this level of detail for tax filing purposes. Prior to offering any additional services, a bookkeeper will verify that your records are as precise and current as possible.
Categorization of Transactions
Fundamentally, your business operates through numerous transactions that impact your financial statements and influence your business decisions. Each transaction can be categorized into one of five types: asset, liability, equity, income, or expense. Properly assigning transactions to the correct accounts is essential for effective bookkeeping, requiring specialized training to maintain accuracy. Misclassifying transactions can result in inaccuracies in your financial statements.
Monthly Bank Reconciliations
Bookkeeping cannot be considered complete without conducting bank reconciliations. This crucial process guarantees that all transactions recorded in QuickBooks align with those on your bank statement. Neglecting this task is like only mowing half of your front yard. Business owners should anticipate their bookkeepers to carry out this vital task on a monthly basis.
Preparation of Monthly Financial Statements
On a monthly basis, it is important for your bookkeeper to furnish you with precise financial statements for your business. These usually consist of an Income Statement, Balance Sheet, and a Statement of Cash Flows (if applicable). These documents serve as the guiding tool for your business, providing insights into past performance and future direction. A skilled bookkeeper will be adept at interpreting these statements and highlighting any favorable or unfavorable patterns that may impact your business.
Ancillary Services
A bookkeeper can offer various additional services, which are usually optional for most clients and can be included at any point during the business relationship. Below is a list of some of these services:
Accounts receivable and accounts payable management
Sales tax filings
1099 filings
Federal and state income tax returns
Payroll services
Software training
Budgeting
Cash flow forecasting
The majority of bookkeepers opt not to provide a full range of services as it may diminish their focus on the main bookkeeping tasks. For instance, many bookkeepers refrain from offering tax services due to the extensive expertise and specialization demanded by tax regulations. These regulations are subject to frequent changes, making it advisable for tax-related tasks to be handled by professionals who concentrate solely on preparing business and personal tax returns for their clients.
Bookkeeping is an extensive service that plays a crucial role in helping small business owners enhance their business operations. It is an essential component that can determine the outcome of success or failure for these entrepreneurs.
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