Have you ever asked yourself any of the following questions?
What is a bookkeeper? What does a bookkeeper do? Why do I need a bookkeeper for my business? What is the difference between a bookkeeper and an accountant?
In this week’s Positive Bookkeeping blog we hope to answer these questions and clear up any confusion.
What is a bookkeeper?
Bookkeeping is a necessity, a vital function of a legitimate business. In a business context and in its basic form, bookkeeping is the recording of financial transactions. These transactions take the form of sales, purchases, receipts and payments by or to an individual or organisation.
A bookkeeper is a person who maintains the day-to-day financial records of an organisation or an individual.
Single-entry bookkeeping is the simplest form of recording financial records, a linear account of expenditure and income.
Double-entry bookkeeping is a more sophisticated form of record management, which treats expenditure and income as two separate columns, from which a bookkeeper or an accountant can see what financial profits and liabilities an organisation or an individual has from the discrepancy between the two columns.
What does a bookkeeper do?
Bookkeepers record the financial transactions of a business and present them in a neat and correct format, whether in a book, on a spreadsheet or on software and will normally complete your VAT return. They will spend more time with your business and really get to know how it runs and what you want them to get out of the figures.
They will also be able to explain the books to you in a language that you can understand. It could be that they can take over the task of chasing customers for payment. They often prepare business finance reports and tax returns, providing the most basic and essential of financial infrastructure from which more advanced accounting practices can be carried out.
Recording and managing financial data is more complicated than copying receipts into a spreadsheet, and bookkeepers are responsible for a whole set of tasks outside of simple data input and these days a bookkeeper will use an online software package such as Xero.
This allows them to create advanced data records capable of producing a variety of detailed reports, looking at anything from gross profit to specific expenditures.
Why do I need a bookkeeper for my business?
The question should not be do I need a bookkeeper but rather have I got the best bookkeeper for my business.
All people who are engaged in financial transactions of a commercial nature need to maintain their books. It doesn’t matter whether you are a handyman working as a sole trader or a vast multinational, a clear detailed log of your financial history needs to be maintained.
In the most basic and fundamental sense, bookkeeping allows a business or an individual to see whether their venture is profitable or not. If you are spending more money that you or your organisation is earning, you will be making a loss on your professional activities.
There is, however, a more pressing, essential need to maintain your books, for they are ultimately used to calculate how much tax you owe to the government of the country you live in.
Failure to pay the tax you owe is punishable by law and, in extreme circumstances, can result in prison sentences.
What is the difference between a bookkeeper and an accountant?
Small businesses often ask: “Do I need a bookkeeper or an accountant?” The answer is normally both. Bookkeepers and accountants do different things and have different roles to play in assisting business owners to manage their finances properly.
Also, bookkeepers charge less for their time. It therefore makes sense for them to do as much of your work as they can.
Make sure your bookkeeper and accountant talk to each other and get on with each other. They should be in accord over the best system for your business. There is no place for egos here, this is your business and you are the customer.
In the simplest of terms, an accountant in a finance expert, there to give you advice on all monetary aspects of business. However, a bookkeeper is a data-entry professional, whose primary role is to make and maintain accurate business records. The data collated by a bookkeeper is often used by business owners and accountants to make financial decisions.
Based on the records compiled by a bookkeeper, an accountant will create reports from recorded financial transactions that are required by government agencies and other bodies, and will formally file those accounts by the appropriate deadline.
Getting it right from the start will mean you have regular information about your business that you understand and reduced annual fees from your accountant.
If you wish to discuss any of the points raised in this blog please contact us here
We offer free 30 minute Skype or telephone call where we discuss where you are now in your business, where you would like to be and how we can help you to achieve your business goals.