Last editedFeb 20232 min read
From preparing for audits to filing taxes, bookkeeping plays an essential role in keeping your business finances organized. If you’re thinking of hiring a bookkeeper, you might be wondering which accounting tasks they’re responsible for. So, what does a bookkeeper do for a small business? Keeping a record of all transactions is just the start.
What is a bookkeeper?
Bookkeepers are responsible for maintaining a business’s financial records. This means updating all accounts to show the day’s transactions, debits, and credits. They prepare, track, and verify all financial documents.
While bookkeeping and accounting are sometimes used interchangeably, there are a few key differences to be aware of. Bookkeeping forms the foundation of accounting by tracking everyday business activity. An accountant uses these financial records to assess a business’s financial health and make strategic recommendations. There’s some crossover between the two, as both bookkeepers and accountants typically help prepare financial statements and tax returns.
What does a bookkeeper do?
There are two primary areas of small business accounting that a bookkeeper is responsible for.
Data entry: The bookkeeper records financial transactions in appropriate accounts and balances the books, including debits and credits.
Bank reconciliation: The bookkeeper compares these financial accounts with bank statements to verify accuracy and reconcile any discrepancies.
What does a bookkeeper do as part of their day-to-day workload? As part of data entry and reconciliation, they’ll handle tasks such as:
Creating and issuing invoices
Following up on invoices for payment
Ensuring supplier invoices are accurate
Calculating payroll including any tax deductions
Updating the cash flow statement
Preparing sales and purchase invoices
They’ll also often assist with end of year reporting, preparing the income statement and balance sheet. Bookkeepers can help with preparing and filing your annual tax returns with the IRS, while claiming back any tax for expenses.
Why is small business bookkeeping important?
Whether you use accounting software or hire a professional, bookkeeping for small business is essential for keeping financial accounts straight. A bookkeeper keeps all data in the correct accounts, recording your assets, liabilities, revenues, expenses, and other details in the general ledger. They’ll make sure your bookkeeping method is consistent whether you opt for single-entry or double-entry, while tracking all incoming and outgoing payments.
All these tasks ensure your small business understands what’s happening with its money. It’s essential to know where your money is coming from and going to if you want to sustain growth. Benefits of bookkeeping include more organized financial records, better tax preparation, and a fact-based profitability plan for future growth.
Small business bookkeeping tips
You’ll have a more successful working relationship with your bookkeeper by implementing organized systems right from the start. This means bringing them up to speed with all historic transactions, financial statements, and other records that the bookkeeper might need to understand your business. Retain all files and documents showing this financial data.
Bookkeepers rely on tracking every expense, so keep your receipts and bank accounts current. Another tip to help you get started is to open a separate business account to keep expenses separate from your personal finances.
It's easier than ever to handle bookkeeping in-house with today’s accounting software. Look for platforms like Xero,Salesforce, and others that automate the bookkeeping process. These programs store all invoices, receipts, and other records in a central location, automatically generating financial reports on your behalf. The best bookkeeping software also helps track invoices and records payments. GoCardless can make invoice collection easier by automating the process using ACH debit payments, saving time for you and your customer. It also integrates with hundreds of accounting partners for a streamlined workflow.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.