Whether you sell handmade alpaca socks, enterprise software, or legal advice, there are two things we can guarantee about your business: you earn money and you spend it. Bookkeepers are the ones who help you keep track of all that.
If all your mental powers have been focused on getting your business off the ground, you might not fully understand what a bookkeeper does. In this guide we break down the day-to-day role of a bookkeeper, and why a good one is worth holding onto.
A bookkeeper is someone who prepares your accounts, documenting daily financial transactions. Bookkeepers have been around as far back as 2600 BC—when records were tracked with a stylus on slabs of clay—making bookkeeping not the oldest profession, but pretty darn close.
A Beginner's Guide to Stress-Free Bookkeeping
Bookkeeping is tedious. But it doesn’t have to be. Here’s a stress-free guide to doing your own bookkeeping (that you’ll actually want to read).
A (very) brief history of bookkeeping
In colonial America, bookkeepers would record transactions in a “wastebook”—so called because the data would eventually find its way into an official ledger and the original book would go into the trash.
Today any bookkeeper worth their beans uses some kind of software platform to track finances. But like those old wastebook days, bookkeepers typically hand off their records to an accountant come tax time or when big decisions need to be made.
Bookkeepers vs. Accountants
There are some financial tasks that bookkeepers aren’t equipped for; that’s where accountants come in. While bookkeepers record daily transactions, accountants use the information compiled by a bookkeeper to produce financial models. Bookkeeping is straightforward and transactional, while accounting is more subjective and calls for skilled interpretation—like helping you understand when it’s time to incorporate, or filing your taxes to get the best return possible.
Bookkeepers offer a literal look at where you stand financially in the moment, and accountants help you see the bigger picture and the path your business is on.
But what does a bookkeeper actually do all day?
A bookkeeper’s duties will always include a fair bit of data entry and receipt wrangling. Practically speaking, they label expenses, indicate who you paid and how much you paid, and keep a record of receipts. On the income side, they track incoming payments and sometimes issue invoices.
That said, bookkeeping is more than just dropping numbers into a spreadsheet—it takes meticulous analysis and just enough legal know-how. After all, bookkeepers will help you survive an audit by making sure your records are in order and your deductions are legal.
Let’s break it down further. Typically bookkeepers are responsible for preparing four key financial statements:
- Income statement (also called a Profit & Loss), which shows your revenue and your expenses over a specified time period
- Balance sheet, which is just a snapshot of your financial position at one point in time
- Cash flow statement, which is a record of the cash and cash-like hard equivalents entering and leaving your company
- Statement of changes in equity (also called a statement of total recognized gains and losses) which shows how your share capital, reserves, and retained earnings have changed in a reporting period
Some other important things they can do to help your business run like a well-oiled machine:
- Tag and monitor your fixed assets
- Collect and remit sales tax to the government
- Pay any supplier or contractor invoices
- Monitor debt levels and apply payment to any debt as it comes up for payment
- Record incoming cash and deposit at the bank
- Reconcile accounts every month
- Issue financial statements
- Equip your accountant with accurate financial statements come tax time
- Maintain your annual budget
- Report on issues and variances when they pop up
- Process payroll
The benefits of having a good bookkeeper
Why does any of this matter? If you have a top-notch bookkeeper, you’ll reap some of the following benefits:
- Better budgeting decisions, knowing exactly where your money is going
- Peace of mind knowing your books are in order and tax season won’t be a scramble
- Audit-proof business with detailed documentation
- More hours in your day to focus on your business
- Understand the seasonal flow of your business
- Understand the key metrics in your business: revenue, costs, profitability, etc.
Somehow “bean counter” has become a derogatory term. But anyone who has tried to manage the income and expenses of their own business knows that bookkeepers deserve some serious respect.
It’s a role that takes the curiosity and drive to always get to the bottom of unresolved questions—and the willingness to do a little sleuthing when numbers don’t add up. It also involves a great deal of trust. Not only are you entrusting your bookkeeper with sensitive data, you are relying on their accuracy. A good bookkeeper never cuts corners, and they are indispensable to business owners who want to spend time growing their business, instead of maintaining it.