Balance the books. Reconcile accounts. Calculate margins. Square the ledger.
It’s just another day in the life of a bookkeeper.
But does a small business need a bookkeeper?
What Does a Bookkeeper Do?
A bookkeeper can play an essential role in the financial health of a small business by monitoring and managing accounts and financial records, and helping track the business financial bottom line on a daily basis.
Bookkeeper responsibilities may include:
- Produce invoices
- Pay invoices
- Post account transactions, credits and debits
- Reconcile accounts
- Track journal entries
- Present profit / loss statements
- Help prepare financial statements for the small business CPA
What is the Difference between a Bookkeeper and an Accountant?
A bookkeeper and accountant are considered professional positions, requiring specialized education or rigorous on-the-job experience acquired over years. Although similar, a bookkeeper and an accountant are not the same.
A career as a bookkeeper may not require a professional certification or license, or even a college degree. It is generally helpful, however, for a bookkeeper to have a background in accounting, a love for numbers and a keen eye for detail. Bookkeepers interested in continuing education can earn a professional certification.
An accountant often oversees the work of a bookkeeper and typically holds a bachelor’s degree in accounting or finance.
Small businesses may require both a bookkeeper and an accountant. In general, a bookkeeper is involved in the day-to-day operations of a small business; an accountant offers analysis and financial guidance based on reports generated by the bookkeeper. Some of the tasks performed by these roles may include:
Accountant
- Provide short- and long-term financial analysis & guidance
- Prepare & file taxes
- Establish & track financial planning systems
- Prepare and present financial forecasts
- Prepare financial statements
- Lead or participate in the budget process
- Lead or manage financial audits
Bookkeeper
- Manage daily transactions related to the general ledger
- Record & track sales
- Record & track payments
- Prepare, track & process invoices
- Process payroll
- Manage inventory
- Monitor cash flow
The Difference Between an Accountant and a CPA
A CPA, or a certified public accountant, has earned a bachelor’s degree, usually in accounting or finance, met rigorous national licensing requirements, and passed a licensing exam in the state where they practice. While accountants and CPAs may sometimes share responsibilities, only a licensed CPA is eligible to file reports with the Securities and Exchange Commission (SEC), or complete and file official audits.
Benefits of Hiring a Bookkeeper
A bookkeeper organizes, tracks and reports on small business finances, helping ensure your data is accurate and accessible. Organized financial systems help with tax preparation, tax audits, loan applications and more. That means you have more time to focus on caring for your customers and growing your business.
How Do I Know if I Need to Hire a Bookkeeper?
Errors. Misplaced paperwork. Late payment fees. Incorrect invoices. Inaccurate commission payments. Unbalanced bank accounts. Lost small business growth opportunities. Time away from family, friends, and doing the things you enjoy. If you recognize one or more items on this list, your small business could potentially benefit from a bookkeeper.
- Put a Price on Your Time. Small business owners tend to do it all, even when it may not be cost-effective. According to the U.S. Bureau of Labor Statistics, the average cost for a bookkeeper in the U.S. is less than $23 per hour or approximately $47,500 annually, depending on geography and other factors. If you pay yourself more than that, it’s worth asking if you could invest your time more profitably (the likely answer is yes).
- Disorganized or Inaccurate Financial Data. A bookkeeper will help ensure your books reflect the current state of your cash flow. That means you’ll have a clearer understanding if your new product pricing is profitable, if you can afford to buy that new piece of equipment, or pay your team members a holiday bonus. A bookkeeper will also prepare all the necessary documents for delivery to your accountant for tax season.
- You’re Paying Your Accountant to do Basic Bookkeeping. An accountant or CPA typically has a much higher bill rate than a bookkeeper. Depending on the size of their practice, an accountant or CPA may be too busy to devote full attention to basic bookkeeping tasks. Plus, an accountant or CPA may not provide you with detailed financial information—or be available to answer questions about specific monthly reports—as quickly as you’d like.
- Financial-Speak Isn’t Your Strong Suit. A bookkeeper can effectively talk with both you and your accountant, minimizing your involvement in the more perfunctory record-keeping tasks. A bookkeeper can also provide your accountant with current financial statements for tax prep, loan documentation and more.
- You’re Paying Penalties or Not Leveraging Deductions. A bookkeeper can track and categorize your expenses to help ensure you’re capturing the appropriate small business tax deductions. They will also file and submit quarterly estimated taxes, helping prevent you from costly tax penalties.
What Should I Look for When Hiring a Bookkeeper for My Small Business?
Whether a full-time or part-time employee, self-employed practitioner, or a bookkeeping service, hiring a bookkeeper comes down to an exploration of business needs and candidate expertise, experience and culture.
- Business Needs. Identify the job responsibilities, decision authority, reporting relationships, pay, and whether the employee will work part-time or full-time from the office or remotely, then write the job description. Most importantly, define how the bookkeeper will make your life easier and help your business grow. Sourcing candidates? Instantly find top talent.
- Candidate Expertise and Experience. Look for a knowledgeable, detail-oriented, organized, flexible, trustworthy candidate with strong communication skills and a client-centered mindset. It’s also important for the candidate to be able to work independently and within a group, and have a keen eye for identifying and fixing errors in your books. Direct or related industry experience may be important to you, as well.
- Culture Fit. It’s likely your bookkeeper will interact with people from across your small business, customers, vendors and your CPA or accountant. In many situations, your bookkeeper may be authorized to speak on your behalf. It’s important that your bookkeeper represent you and your business to your satisfaction.
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Bookkeeping FAQ
What qualifies someone as a bookkeeper?
A bookkeeper is considered a professional position, requiring specialized education or rigorous on-the-job experience acquired over years. While a bookkeeper doesn’t require a professional certification or license, or a college degree, it is helpful for a bookkeeper to have a background in accounting, a love for numbers and a keen eye for detail.
Is a bookkeeper cheaper than an accountant?
A bookkeeper is generally less expensive than a CPA or accountant.
Should you hire a bookkeeper or do it yourself?
Bookkeepers can help you avoid financial penalties, identify discrepancies, analyze cash flow, point out ways to help save your company money, and save you time. If you’re spending more time on bookkeeping responsibilities than growing your business, it may be time to consider hiring a bookkeeper.
Do bookkeepers handle payroll?
It depends. Many small businesses have their bookkeepers manage payroll and payroll tax filings. Bookkeepers can provide a range of additional services are a range of extra services that bookkeepers can provide, such as running payroll, preparing VAT returns and preparing and filing tax returns. services that bookkeepers can provide, such as running payroll, preparing VAT returns and preparing and filing tax returns.
