Bookkeeping for small businesses – all you need to know

Small Business Advice 9 January 2018
bookkeeping for small businesses

How bookkeeping can help you run your business

Let’s face it, some of us aren’t good with numbers. At school, the mere mention of a maths test would be enough to prompt a mini panic attack, so imagine dealing with your business’ finances on a daily basis. Thankfully, now we can pay experts to take care of the hard sums.

Accountants might get all the glory, but you could argue that bookkeepers are the unsung heroes of finance management. Many people think bookkeeping and accounting are the same thing (both roles do share common goals) but there are important differences. To manage your accounts successfully, it’s important to understand the responsibilities of a bookkeeper as opposed to an accountant. Do you need a bookkeeper, an accountant, or perhaps both?

Bookkeeping vs accounting

Being a bookkeeper

Bookkeeping is the recording and reporting of daily transactions – this can be a subset of accounting. This why it’s important for a bookkeeper to have a strong understanding of both accounting and relevant, industry-specific software. This allows them to create advanced, detailed data records and reports that cover anything from gross profit to expenditure. Bookkeepers can also take charge of data reconciliation, which means ensuring records match bank statements and cash transactions.

Important bookkeeping tasks:

  •         Keep track of daily transactions
  •         Prepare and send invoices to clients
  •         Post debtors and creditors report
  •         Calculate interest and investment
  •         Maintain subsidiaries and general ledgers
  •         Handle company payroll

You might be familiar with a general ledger – this is a record of all your company’s accounts. This can take the form a document that includes the amounts from sales and expenses, this is known as posting. For example, every time a sale is completed, the ledger is usually posted by the bookkeeper.

So what does it take to be a bookkeeper? An attention for detail, for starters. They also need two to four years’ experience or higher education in a finance-related subject. Sometimes the bookkeeper’s work is overseen by either a senior accountant or the business owner whose books they’re doing.

Being an accountant

An accountant makes sense of the bigger financial picture. To put it simply, an accountant puts together a financial report or model based on the information compiled by the bookkeeper or business owner. This model should include forecasts and give a better understanding of cash flow and profitability.

Important accounting tasks:

  •         Record expenses that aren’t yet included in the bookkeeping process
  •         Prepare company financial statements
  •         Analyse costs of running operations
  •         Complete and submit income tax returns
  •         Help the business understand their financial decisions

To be an accountant you generally need a bachelor’s degree in accounting or a finance degree. However, many accountants pursue voluntary qualifications as a way to demonstrate expertise to potential clients. If you are sure you need one, we have put together a guide on how to find the best accountant for your business

So why choose a bookkeeper?

Bookkeepers are more often than not trained and use the same financial recording methods as accountants. If you want your accounts checked and monitored regularly, then a bookkeeper is the way to go. Accountants usually look at your accounts quarterly. Just like an accountant, a bookkeeper can also advise on financial issues that might impact your business in the near future, such as cash flow problems or late invoice payments.

Where can I find a bookkeeper?

Your business deserves the best. You need to make sure you find the best bookkeeper for the task at hand – this can lead to building a long-term working relationship.

You can find a bookkeeper in the following places:

  1. Check local ads
  2. Turn to the Association of Institute of Certified Bookkeepers (ICB) in your area
  3. Browse online forums for advice
  4. Rely on word-of-mouth recommendations

Speak to others in your specific industry. This way you get a second opinion about a bookkeeper’s reputation and what might be best for your business. You also a good idea of whether or not the bookkeeper is worth their fees.

What kind of questions do I need to ask a bookkeeper?

Once you’ve chosen your candidates, you’ll need to get a clearer idea of personality and experience. Here are a few questions that you might want to ask bookkeepers to see whether or not they’re a good match:

  •          How long have you been bookkeeping?
  •          What type of clients have you worked with?
  •          Do you have any certification or qualifications?
  •          Do you have experience with any particular software?
  •          Do you have a process that you go through when you do the books?
  •          How often will my account be serviced?
  •          How do you invoice and what’s your rate?

A final word

Whether you hire a bookkeeper or fancy doing the job yourself (perhaps with specialised software and invoice templates), it’s vital that you stay on top of your accounts. But it’s important know your strengths and weaknesses, as well as the challenges that face you and your industry. Ask yourself what’s best for your long-term financial future. In the meanwhile, if you want to save even more time from taking payments, explore our range of card machines and payment gateway for taking card payments online

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