There are over 30 million small businesses in the United States. While starting your own enterprise afloat is already a big commitment, keeping it in business is even more challenging.
One of the more confounding aspects of owning a business is the financials. A key component of that is bookkeeping.
But what is bookkeeping? Why is it so important for small business owners? Should you hire a small business bookkeeper or try to manage it yourself?
In this article, we’re going to answer some of those questions and more. Read on to find out what a small business bookkeeper does and why they’re important.
What is a bookkeeper?
In a nutshell, a bookkeeper is a professional who helps businesses and organizations keep their finances in order.
They are responsible to manage accounting ledgers, recording journal entries, and generating financial statements.
Bookkeeping vs. Accounting
First, let’s get some common confusions cleared up. Bookkeeping and accounting, despite both being important, are two different disciplines.
The biggest distinction is that bookkeeping is a purely administrative action while accounting is more akin to advising.
A bookkeeper keeps track of day-to-day transactions. The administrative tasks of bookkeeping include collecting receipts, invoices, purchases, and other documents. Accountants are more subjective in their approach since they offer financial insights based on those documents.
In other words, bookkeeping is focused on generating data based on your business’s actions. Accountants will take that data and make recommendations based on the numbers presented.
More Details on a Bookkeepers Responsibilities:
Like we mentioned, bookkeepers keep track of all the money that’s gone in and out of your business. They look at your finances and convert them into easy-to-read documents.
Examples of small business bookkeeper duties include:
- Posting debits and credits
- Managing payroll
- Creating invoices
- Balancing ledgers, subsidiaries, and accounts
- Recording transactions
Arguably the most important duty that small business bookkeepers have is maintaining a general ledger. Ledgers record the amounts included in sales and expense receipts.
Back in the day, bookkeepers would maintain ledgers by hand with sheets of paper. Today, small business bookkeeping software is the most common platform used to manage this task.
Using a paid, online software makes it easy for bookkeepers to track sales and purchases while converting that information into readable documents. Additionally, business owners can pull their own data and reports from these platforms at any time needed, and books should be up to date in real time.
Why Bookkeepers Are Essential to Your Business?
Most of the time in the beginning of a small business, the owner will handle the bookkeeping. As things begin to grow, however, you may find that you need the extra time and could benefit from outsourcing it all together.
You might be reading our description of bookkeepers and wondering whether or not they’re essential for your business. The truth is, bookkeepers are a must-have for any small enterprise that’s just starting up.
Remaining compliant with IRS regulations can be difficult and confusing. Small businesses are now more susceptible to IRS audits, meaning bookkeepers are more valuable now than they’ve ever been.
Bookkeepers can organize your books and keep them neatly prepared for whenever the IRS comes to your door. The best way to avoid audits is to prove that your business is paying your taxes just as the IRS ordered.
Reconcile Bank Accounts
If you use different financial accounts, credit cards, and banks, transactions can get a little jumbled. Bookkeepers can reconcile those accounts and organize them based on your needs.
Bookkeepers will clean up your cash flow statements and ensure your accounts match the balances from your accounting software.
Accurate Financial Recording
Something that’ll help keep needless anxiety away from a business owner’s mind is more accurate financial recording. Small business owners have to know where your cash is coming from and where it’s going.
Bookkeepers are trained to keep that information organized and secured. For example, if you want to know how much you’ve spent on kitchen equipment, bookkeepers will keep track of that information.
If you ever have issues with your workers, vendors, or customers, accurate financial documents will help you as well.
When it comes to taxes, new small business owners can start to get overwhelmed. There are a lot of boxes to check, and failing to do so could result in an IRS audit.
Bookkeepers are there to make sure that doesn’t happen. They’ll organize all your important tax documents for easy retrieval.
For example, you’re working with someone to organize your tax returns. Bookkeepers can get important invoices out of your file storage to optimize this process.
Optimizing your budget and ensuring you’re spending your cash as efficiently as possible is crucial for small businesses. Bookkeepers help you dive into the details of your spending.
For example, they can prepare financial statements that illuminate which products, services, and customers are creating the most revenue. You can use this to shift your business’s focus and operate more effectively.
It can also show whether you need to invest more money in a specific service instead of another. Bookkeepers help you make more informed decisions about your spending and your future.
How to Choose the Right Bookkeeper
Now that you know what a bookkeeper brings to your small business, it’s time to hire the right candidate. There are two options to review, as they all have pros and cons.
Hiring someone in-house
- Pro: Able to directly manage full time
- Cons: More expensive and could be a waste of resources
Reaching out to a bookkeeping firm
- Pro: More affordable
- Con: They only perform tasks that are within a scope of work agreed upon
Which strategy you choose is based on your budget, the size of your business, your growth strategy, and the specific duties you need to manage.
Make sure you hire bookkeepers that are in line with your future plans. A bookkeeper that can scale along with your business will be valuable down the line.
Hiring someone who’s skilled enough to leverage bookkeeping software might also be a safe bet. The more you can automate, the more efficient your bookkeeping process can be.
Leverage Small Business Bookkeepers Today
Owning a small business requires a lot of responsibilities, but you don’t have to do it alone. Use this guide to help you decide if a small business bookkeeper is right for you.
Ready to hire someone to manage your books? Contact us today for a free consultation.