Firstly, what is the role of a bookkeeper?
A bookkeeper is someone who records the financial transactions of your business. They also:
- keep track of sales, purchases, payments and receipts
- work on the design maintenance and review of internal business processes
- organise, collate and record financial data on a day-to-day basis and store this information in general ledgers
- record the financial information of your business in a standard way, so that accountants can also access it.
- In this guide we’ll look at what a bookkeeper can do for you, and when you might hire one for your business.
Why do you need one?
If you started your own business, it’s likely that you’re passionate about running it and concentrating on the tasks you love doing. But if you’re like most business owners, you’re not so interested in recording all the details of every financial transaction.
For example, imagine you’re a hair salon business owner. You might have:
- a simple business model
- a high transaction rate with lots of customers
- many sales a day – perhaps dozens or more
- supplier invoices for hair products
- sales recorded through cash registers or other POS (point of sale) systems
- staff wages to record and pay.
That’s a lot of information to track and record. And bookkeeping might not be something you enjoy or have time to understand.
Without proper bookkeeping, it would be easy for transactions to go unrecorded, left to pile up until the end of a financial period. Mistakes could be made and important details could be lost or forgotten.
That’s where bookkeepers come in. They can lighten the load on the business. They can take away the day-to-day recording of receipts, invoices and other transactions.
What do they actually do?
Bookkeepers are trained and use the same financial recording methods as accountants. They do this so that your accountant can quickly and easily process your financial information. They will:
- Take all your receipts, invoices and other transaction details.
- Record the information in accounting software using proper accounting methods.
- Work with you to make sense of the numbers, for example assigning costs to specific clients.
But there’s more to bookkeeping than recording daily transactions. People who do this work are usually highly skilled at using accounting software. They will be able to advise you on:
- add-on solutions to streamline your business workflow, such as POS tools
- payroll services to simplify the way you pay your staff
- bookkeeping rescue work, tidying up mistakes made by inexperienced staff
- training for small business on using accounting software.
- They can also offer day-to-day support for small business owners. In fact a good bookkeeper is your partner in keeping things running smoothly within your business.
How are they different to accountants?
Bookkeeping is a vital service. But how does it differ from accounting? The two services are often compared, but actually they are complementary:
Bookkeepers do the day-to-day work and bring the accounts up to a high standard of detail and accuracy. They can also advise you on issues that might affect you in the near future, such as cashflow problems or late invoice payment.
Accountants will look at the accounts that have been created, often on a quarterly basis. They will make any minor adjustments required. They will use the information in the accounts to file tax returns and other official reports. They will also provide high level business advisory services.
For your business to run smoothly, ideally you need both people. You’d hire a bookkeeper to look after the day-to-day work. And you’d hire an accountant to handle official reporting and high level business advice.