What Bookkeepers Do: A Complete Guide to Their Role and Importance
The fundamental task of a bookkeeper is to organize a business’s financial information and activities. They take every financial transaction clients put into the business every day—whether it’s a revenue transaction or an expense item—and record it. Without an organized and structured bookkeeping system in place, a business owner will find it nearly impossible to make smart decisions for their business, or even plan for the organization’s future, in regard to capital financing, equipment purchases, or expansion.
Typically, most commercial entities hire bookkeeping services to do those services described above for them. This may involve tracking payroll, preparing invoices, or monitoring accounts to make sure everything is ready for a tax professional. Bookkeeping services help business owners forget about the bookkeeping; they can either focus on their company’s operational activities to generate revenue, or exercise some method of sanity or leisure without having to worry about the bookkeeping process, knowing that its being handled accurately by true professionals.
Why Bookkeepers Are Essential for Every Business
All successful businesses, regardless of size, excel for a reason: they maintain and rely on accurate financial management for success. Bookkeepers act as the support of this process, by keeping a clear and clean record of income and expenses. When completed, business owners will always know what is happening with their financial status, but will also help the owner know what is occurring with their operations, develop and control cash flow, and provide a snapshot for planning.
In the competitive environment of today, the need for reliable financial support for business has increased. With professional bookkeeping services, businesses reduce administrative headaches, have lessening risk of compliance issues as it relates to taxes, compliance licenses, and overall relax the management so they can focus on growth. Bookkeepers serving the mircro-business, start-up or established enterprise provide the clarity and confidence necessary to revisit your financial decisions.
What Does a Bookkeeper Actually Do?
Bookkeepers are frequently regarded as the unsung heroes of commercial finance. While accountants typically focus on more advanced financial analysis and tax strategies, bookkeepers ensure that the daily financial details run smoothly. Their work is both varied and invaluable, and it maintains the groundwork for accurate financial reporting and informed decision-making in business.
Recording Financial Transactions
The core function of bookkeeping is maintaining an appropriate record of the financial activity. Each sale, purchase, payment, and expense should be recorded correctly, so the business can keep an accurate record of the history of its finances. This requires the bookkeeper to record financial transactions using accounting software and classify expenses in which every expense is allocated to the appropriate account.
For example, when a utility bill is paid, the bookkeeper enters, not only the amount, but classifies that expense as an operating expense. Recordkeeping at this level provides a road map of both the company’s finances that the company owner and accountant can reference for their decision-making process.
Reconciling Accounts and Bank Statements
Another important role is account reconciliation. Bookkeepers will need to compare the company’s records against monthly bank statements. If the company is missing a check, has a bank charge, or has a missing transaction, that is an indication they will need to correct an issue.
Account reconciliation is a very important step to ensure fraud is not occurring, overdraft fees are not happening, and that the financial records have the true balance. If a company does not perform account reconciliation to find the issues, they risk basing decisions off of incorrect financial information which can lead to costly mistakes.
Preparing Financial Reports
Bookkeepers also create financial reports detailing important information about the company’s performance. Typical financial reports may include profit-and-loss reports, balance sheets, and cash flow reports. Although these reports are often less complex than the reports produced by an accountant, they still provide the business owner with a means of converting information about revenue, costs, and gross profit into useful actions.
For example, a monthly cash flow report may reveal to the business owner that, while sales may be increasing, expenses are rising faster than sales, allowing the business owner time to change spending patterns or to consider changing their budget before the situation worsens.
Managing Payroll and Invoices
Many businesses have bookkeepers who work with payroll processing and invoices. Bookkeepers will assure that employees receive accurate, timely pay, with the appropriate taxes withheld during the transaction. At the same time, they will also bill clients/use invoices on a timely basis. Choosing to process payroll on time will have a positive impact on employee morale and invoicing helps to maintain a healthy cash flow.
In supporting payroll and invoicing, bookkeepers help to maintain the health of both operational strategies and operational business needs.
The Value of Bookkeeping in Business Growth
In the end, bookkeepers are the financial managers of a company. By carefully recording, reconciling and reporting on business transactions, they form the backbone of the financial side of a business. When these bookkeepers work in conjunction with a professional bookkeeping services, they ensure that the business stands the best chance of remaining compliant, operating efficiently, and being positioned for business growth.
How Do Virtual Bookkeepers Work?
As companies move toward remote work and digital solutions, the demand for virtual bookkeepers has continued to grow quickly. A virtual bookkeeper will perform most of the same basic functions as a traditional bookkeeper but will do the work remotely, using cloud accounting software and secure communication. This allows the business to have access to financial management by using a professional remotely rather than an employee on-site.
The process usually starts with secure data sharing, in which the virtual bookkeeper connects to the business’s financial accounts, including bank statements, payroll, and invoicing. Afterward, the virtual bookkeeper records transactions, reconciles accounts, and generates reports, while collaborating with business owners via email, video conference, or one of many specialized financial dashboards.
A virtual bookkeeper utilizes technology to offer your business real-time updates and keep your financial records current. This increases efficiency and enables business owners to concentrate on operating their business rather than administrating their business.
How Do Virtual Bookkeepers Work?
Benefits of Hiring a Virtual Bookkeeper
The benefits of a remote fiduciary go well beyond cost savings. The following are some of the main advantages:
- Cost-effective – An in-house bookkeeper is expensive due to their salary, benefits, and office space. A remote fiduciary does not incur those extras and still provides you with sound financial support.
- Flexibility and scalability – Virtual bookkeeping services are easily adjusted to align with your needs whether you are a startup or a growing company. You can scale services up or down depending on the busy or slow times of the year.
- Utilization of Advanced Technology – Virtual bookkeeper is able to access and utilize advanced accounting software and tools, which includes features such as automated invoicing, real-time financial data tracking and cloud storage for your financial documentation.
- Better Data Privacy – Most virtual bookkeepers utilize encrypted systems for your financial information, so you won’t have to worry about anyone else getting their hands on your financial information.
- More Time for Everyone – With outsourced bookkeeping, you can spend less time managing the numbers in your business, and more time developing relationships with your customers, improving your product(s) or services.
Why Do Businesses Need Bookkeeping Services?
Every organization, regardless of whether it is a one-person startup or a significant corporation, requires proper financial management to survive and properly manage a company. Bookkeeping services are an important component of financial management and serve as the structure to ensure all funds coming in and out are accounted for. Without bookkeeping services, organizations will be late on their taxes and not keep track of expenses, resulting in poor financial management.
Whether you outsource or hire bookkeeping services, it will provide consistency and accuracy in managing daily financial transactions. As a result of this consistency, the business owner will experience lower stress levels and more time to not only focus on the transactions at hand but give the business more bandwidth to develop and grow. Bookkeeping services ensure accuracy and provide a safeguard against fraud and errors. They also ensure compliance on behalf of the business and help to ensure the financial integrity of the organization.
What Problems Do Bookkeeping Services Solve?
Many business owners will attempt to do their own record keeping at the outset, but as their business grows, the record keeping becomes more complicated. Issues like missed invoices, late payments, and misclassified expenses can quickly accumulate as a broader financial headache, and this is where bookkeeping services can make a massive difference.
They help solve accounting issues such as:
- Cash flow management: To ensure there is always enough cash flow available to pay the bills.
- Expense tracking: Tracking expenses and classifying them properly, while also highlighting potential cost savings.
- Rest assured in compliance: To ensure businesses are in adherence to tax obligations and reporting requirements.
- Errors are caught: Mistakes can happen, and bookkeepers can catch any before a costly issue arises.
Bookkeeping services can alleviate these issues by allowing businesses to stay focused on their financial picture and remove any frustrations with financial ambiguity.
Choosing the Right Bookkeeping Services Provider
Not all bookkeeping services are identical. Some bookkeeping service providers working for small businesses only work at that level and others specialize in larger businesses or a certain industry. Ideal partners will depend on your business’s size, the intricacy of your finances, and the interaction style you prefer.
Look for these traits when assessing their service:
- Experience and Industry Knowledge – a service provider with industry experience can understand each unique financial situation.
- Technology and Tools – you want to ensure they use cloud-based software you feel comfortable using to get timely access to your finances.
- Scalability – The service you select should support your business as it gets larger and provide additional services as necessary.
- Reputation and Reviews – Great client reviews and references are two excellent indicators that you can trust the service.
Ultimately, the right bookkeeping services provider is about more than just crunching numbers. They should be a financial partner to you, that helps you make better decisions toward sustainable growth.
How Bookkeepers Support Small and Large Businesses
Bookkeepers help to have an essential function in organizations of all types, regardless of size. While their work is dictated by the size of the organization, the impact of their efforts remains the same for all. Bookkeepers help to foster the framework that small organizations require to stay on top of their finances and ensure the circle of efficiency and accuracy within larger organizations with comprehensively more complicated financial systems.
Support for Small Businesses
For small business owners, the roles of owner, operator, salesperson, marketer, and finance manager can seem to suffer from multiple personality disorder. When there is one more piece to it, the bookkeeping piece, it can feel like overload. A bookkeeper can:
- Track your sales and expenses consistently.
- Keep a pulse on cash inflows so your bills and payroll get paid on time.
- Provide straightforward but accurate financial reporting so you can make decisions.
For small businesses, a bookkeeper is more than just a record keeper, they are the backbone of financial stability and action to ensure the business does not make costly mistakes. The financial culture established by a bookkeeper can be a valuable help for startups which need good financial records to attract investors or obtain loans.
Support for Large Businesses
In larger companies, bookkeepers work in the finance department and partner with accountants, financial analysts, and auditors. Their function becomes specialized with a focus on areas like accounts receivable, accounts payable, or payroll.
For example, one bookkeeper might solely work on paying suppliers and making sure the vendor gets paid promptly. Another bookkeeper might work exclusively on managing the employees’ expenses and reimbursements. This specialization enables bookkeepers in larger firms to utilize their time and work more efficiently by knowing their responsibilities.
Bookkeepers also help with compliance in the industry’s standards and assist with internal audits to support the integrity of financial reporting across departments. A lack of this support can lead to inefficiencies, bottlenecks, and reporting inefficiencies that can cost a company millions of dollars.
Why Their Role Matters Across All Sizes
It makes no difference if you are in a multi-national organization or a small independently owned liquor store, bookkeepers provide the same fundamental value of financial clarity, and dependability. Attention to detail allows leaders of businesses to reliably base decisions on concrete numbers, not hunches.
Bookkeepers help the business owner, by providing many skill sets, ranging from making daily operations more efficient, to protecting financial stability over the long haul. Bookkeepers adopt their skills to the specificity of the business and its needs.
The Difference Between Bookkeeping and Accounting
To clarify, bookkeeping and accounting are not the same thing: bookkeeping focuses on daily transactions (typically by assigning receipts to categories), while accounting interprets the data recorded by the bookkeeper, analyzes data trends, and creates contingency programs to maximize business decisions.
Bookkeepers vs. Accountants: Key Responsibilities
- Bookkeepers perform functions such as recording transactions, reconciling banks, invoicing customers and handling payroll. Bookkeepers are there to make sure the financial foundation is solid and that it is up to date.
- Accountants take that foundation and build on it by providing analyses of the financial information, tax preparation, forecasting, and compliance reporting.
In simple terms: Bookkeepers establish the financial “raw data”, while accountants innovate on that data to create a basis for strategic planning, and ultimately revenue growth.
Collaboration Between Bookkeeping and Accounting Services in USA
To keep finances going, it often takes bookkeepers and accountants working together as a team. Bookkeepers provide the numbers that accountants use to prepare things like tax returns, financial forecasts or planning for the long haul. If bookkeepers finish their job and accountants begin theirs, accountants may then ask bookkeepers to change how they categorize expenses or make different presentations reports to improve how the data fits together.
This partnership is especially relevant when working with firms with accounting or bookkeeping services in the USA, since many firms wrap bookkeeping and accounting services together in a package. Combining both bookkeeping and accounting helps to build an overall financial management system for your business that will be seamless, accurate, proven compliant and give you insights that are strategic.
Do You Need Bookkeeping Services in New York?
There are many unique challenges to operating a business in a busy city such as New York City. Managing the financial part of the business requires utmost accuracy and dependability, due to the financial challenges created by the very strict tax rules, a higher-than-average cost of doing business, and so on, all of which present issues that bookkeeping services in New York can address.
Although bookkeeping services in New York handle the same basic financial responsibilities as bookkeepers, in areas such as tracking transactions, reconciling accounts, and running payroll, they specifically cater to local needs. Bookkeepers in New York are familiar with all the tax requirements associated with the state and city, and also understand the context of working in a competitive business city, as well as any industry regulations associated with various industries.
Local Expertise vs. Remote Support
Choosing whether to employ local bookkeeping services or to collaborate with a remote bookkeeping service is one of the primary decisions every business owner should consider. Local bookkeepers in New York will support you face-to-face, along with local regulatory knowledge and the ability to cooperate closely with nearby accountants and tax advisers.
In contrast, remote or virtual bookkeepers will often provide a lower-cost option while offering flexibility and real-time cloud access to their clients’ financials. Some business owners will have the best of both worlds by having a combination of a local advisor and virtual bookkeepers.
It doesn’t matter if you are operating a restaurant in Manhattan or starting a small business in Brooklyn, by hiring a professional bookkeeper, you are setting up your business for your finances to be organized, compliant and growth-ready.
FAQs About Bookkeepers
Can a bookkeeper replace an accountant?
How much do bookkeeping services usually cost?
What skills should a good bookkeeper have?
How do virtual bookkeepers keep data secure?
Do I need bookkeeping services if I use accounting software?
What’s the difference between hiring a freelance bookkeeper and a bookkeeping firm?
How do bookkeeping services help during tax season?
Can I hire a part-time bookkeeper instead of full-time?
What industries benefit the most from hiring bookkeepers?
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