Now that you’ve gotten your business off the ground, who is going to keep track of the financials? This is where a good, reliable, trustworthy bookkeeper comes in. A good bookkeeper will stay on top of the financials and hopefully keep you informed of the financial health of your business. If your business is not in good financial health, it is likely that you won’t be in business for long.
Focusing on all the other mundane tasks involved in getting a business up and running doesn’t leave much room to think about how valuable a good bookkeeper can be to your business. To provide insight as to what a bookkeeper does, we’ll delve more into the matter here. We’ll start by providing some history of how double-entry bookkeeping came into existence.
The Birth of Double-Entry Bookkeeping
Luca Pacioli, a monk, a magician, and obviously a lover of numbers, discovered double-entry bookkeeping in Venice. Records show that, Luca Pacioli wrote a huge math encyclopedia, which included a small instructional section on double-entry bookkeeping. That small section of that math encyclopedia is what Luca Pacioli is known for today. These days, in one way or another, double-entry bookkeeping is used in every country and in every business.
Responsibilities of a Bookkeeper
Recording the day to day financial transactions of business, managing the chart of accounts and generating financial statements for specified periods are some basic responsibilities of a bookkeeper. These responsibilities are a lot more detailed and important than they may appear to be. Bookkeepers can do a little, or a lot, depending on their skill set and how much responsibility that you feel comfortable trusting them with. Some of these responsibilities are listed below:
System development to account for financial transactions, which consists of creating and or maintaining the chart of accounts and defining the policies and procedures of bookkeeping.
- Data entry of financial information.
- Posting information to accounting journals or, these days, accounting software using source documents such as cash receipts, customer invoices, and supplier invoices to customers.
- Reconciling accounts to ensure accuracy.
- Complies with federal, state, and local legal requirements for compliance purposes.
- Prepares various financial reports/statements by collecting, analyzing, and summarizing account information and trends. The income statements, cash flow statement, and the balance sheet are some examples of the financial statements that are generally created.
Bookkeepers can be classified under two categories, which is either entry level or full charge. Entry level bookkeepers are generally bookkeepers who perform basic tasks such as data entry of financial transactions and maintaining the chart of accounts. They may have a bit more responsibility than this though. Entering financial data can be done daily, weekly, monthly, or quarterly. The regularity of the inputting of the data depends on how often the business owner wants these tasks to be performed. Full charge bookkeepers have more responsibilities than an entry level bookkeeper, however, even though full charge bookkeepers do perform some accounting tasks, their responsibilities are not usually as complex as the responsibilities of an accountant.
Tasks and Responsibilities of Full Charge Bookkeepers
Full charge, what exactly does that term mean? This term means that the person working in this position, takes on responsibility for more than just maintaining the ledgers. Making journal entries, preparing monthly or quarterly financial statements are some of the responsibilities that a full charge bookkeeper takes on. Full charge bookkeepers typically work for small to mid-sized businesses and they perform the tasks that accountants usually perform for larger businesses. A full charge bookkeeper typically takes charge of a company’s complete financial processes.
Differences between the responsibilities of a bookkeeper and Accountant
An accountant is a person who is professionally trained in all areas of accounting. The most common accounting designation is the Certified Public Accountant (CPA). However, there are a few other common accountant designations as well, such as the Certified Management Accountant (CMA), and the Certified Internal Auditor (CIA). A Certified Public Accountant must be licensed to legally practice, whereas, the Certified Management Accountant and the Certified Internal Auditor does not have to be licensed to practice. Accountants must abide by the ethical standards and guiding principals of the region where they practice, such as following the Generally Accepted Accounting Principles (GAAP) guidelines. A bachelor’s degree is the entry level educational requirement for an accountant.
A bookkeeper pretty much maintains day to day financial processes that accountants would prefer not to have to deal with, such as data entry and the creation and maintenance of the chart of accounts. Accountants find these tasks, among other tasks to be mundane, thus, performing such tasks not to be the most efficient way to utilize their training, skill set, and educational background. It is not required that a bookkeeper have a bachelor’s degree, however some type of professional training in the field of accounting/bookkeeping and knowledge of the Generally Accepted Accounting Principles (GAAP) is typically required.
Good Bookkeepers – The Payoff
A good, reliable, trustworthy bookkeeper can be quite an asset to your business. Depending upon the skill set of the bookkeeper, whether they are entry level or full charge, a bookkeeper can keep your business financials on track, keep you abreast of the financial health of the business, and keep you out of hot water with the taxing authorities, which is something that you want to avoid.
The bottom line, literally and figuratively speaking, should be your main concern as a business owner. The bottom line as it relates to financials is extremely important because if your business isn’t financially healthy, you may not be in business for very long. All the time, effort, and money that you spent getting the business off the ground may fall by the wayside if the business fails, like many businesses do within the first few years of their existence.
A good bookkeeper should keep you informed as to what is going on financially with the business. A good bookkeeper should be able to spot potential problems and make suggestions to you as the business owner to head those problems off before the problems escalate. The Bottom line is that a good bookkeeper can save you time, money and headaches. A good bookkeeper can help to make your life, a little less taxing by allowing you to focus on increasing productivity, which in turn increases revenues, rather than you trying to figure out how to balance the books.