When you ask what does a bookkeeper do, what’s the answer? A bookkeeper has multi-faceted responsibilities that involve numbers, deadlines, reconciliations, and managing finances for a business owner. Depending on the bookkeeper’s expertise, they can take on the role of financial forecaster or recommend technology changes to streamline the accounting process.
Relying on features built into accounting software, bookkeepers can complete tasks traditionally performed by accountants. For instance, they prepare income statements, balance sheets, and cash flow statements. The software bookkeepers use may have built-in job costing, inventory tracking, and integrated systems to receive payments online.
However, accountants will always be your go-to professional to help you monitor your business’s financial health. They are the most indicated to provide financial analyses of your bookkeeping data or offer advice on whether you should apply for a loan.
Learn here the difference between an accountant and a bookkeeper.
But for now, let’s put some guidelines on paper relating to what does a bookkeeper do.
A Bookkeeper’s Tasks and Responsibilities
- Bookkeepers have a high level of integrity and are sticklers for details. Because they handle sensitive, confidential information, they’re careful what and to whom they communicate financial information. They may hold a bookkeeping certification or have an associate’s degree in accounting and/or relevant experience.
- Just like accountants, a bookkeeper follows generally accepted accounting principles (GAAP). The financial clerk oversees data management and stays current on bookkeeping practices and computer applications.
- Along with the business owner’s input, a bookkeeper sets up the chart of accounts commonly referred to as the general ledger (GL). The bookkeeper monitors the accounts within the GL such as assets, liabilities, equity, profit and loss, revenue, and expenses.
- Bookkeepers monitor internal control systems to remain compliant with laws and ensure efficient and reliable financial reporting.
- For accuracy, bookkeepers check invoices, receipts, and other documents to authenticate correctness. They generate financial statements, reconcile bank accounts with the business’s records, and help problem-solve financial concerns.
- One of the most important tasks a bookkeeper performs is managing accounts payable and accounts receivable. By paying bills on time, vendors are willing to do business with you and may offer discounts. Likewise, when customers don’t pay on time, the bookkeeper takes appropriate action so your business’s cash flow isn’t adversely affected.
- When your accounting software includes a payroll module, the bookkeeper can prepare and process payroll and pay withheld payroll taxes to avoid paying penalties to the IRS. Moreover, a bookkeeper uses payment data to prepare W-2s for employees and 1099s for independent contractors. Most bookkeepers calculate and prepare tax payments.
- To keep accurate records, your bookkeeper develops a filing system to store and retrieve copies of invoices, payments, financial reports, and tax reporting documents.
- Bookkeepers help set up budgets so your business doesn’t overspend. In some cases, bookkeepers can run reports to assess what areas may need adjustments.
- Because bookkeepers handle day-to-day financial transactions, they are prepared to provide data your accountant needs to audit your records, close your books, and prepare your tax return.
How your company benefits by having a bookkeeper
You no longer need to ask what does a bookkeeper do but are you ready to hire the right person for the job? You may be a solopreneur who goes it alone or an entrepreneur who hasn’t relinquished these financial tasks to a bookkeeper. Adding a bookkeeper to your support staff may be the best decision you’ll ever make.
Review this post on “How Can Bookkeeping Help Your Business?” that explains how bookkeeping frees up your time to deal with other business challenges. You may be amazed at how important a bookkeeper can be to your business’s success, especially when it comes to increasing profits.