A good bookkeeper is worth their weight in gold. Ever hear the saying “cooking the books”? Well, if someone is cooking your books, you’ll want to know about it, because you’re probably losing money.
A good bookkeeper will keep close tabs on your finances, giving you the ability to estimate cash flow, understand your business’s financial health, and provide financial health statements to potential or existing investors.
If you’re wondering what a bookkeeper really does, and if you need one, here are the five things you need to know.
1. What Does a Bookkeeper Do?
The main responsibility of a bookkeeper is to handle the day-to-day financial transactions of a business. A bookkeeper records all transactions, including debits and money coming in.
Bookkeepers can be in-house or you can outsource the bookkeeping to an agency or individual. Bookkeepers can provide you with up-to-date information about the state of your business’s finances, how much cash you have on hand, how much is coming in, and what debts you have.
2. How Do You Become a Bookkeeper?
To become a bookkeeper, you don’t necessarily need a college degree. Some businesses want bookkeepers to have an associate’s degree, but others will hire you if you have taken a bookkeeping course and have experience.
It’s wise to become certified, which you can do through programs such as Bookkeeper Launch. To get certified, you have to complete their program and take a certification exam. During this time, you will learn the necessary skills to become a bookkeeper and even start your own business, if you so choose.
Bookkeeper Launch was started by Ben Robinson, former CPA and featured in Entrepreneur, INC, The Huffington Post, and other online blogs like The Penny Hoarder. He is one of the most knowledgeable accounting professionals out there… and has created a free series that details what it takes to start your very own bookkeeping business over at Bookkeepers.com.
He’ll go over the basics of what you need to start your very own virtual bookkeeping business.
- An overview of the bookkeeping business so you can see if it is right for you.
- The tools you need to “wow” clients and get paid for your services and
- How to create a steady stream of new clients without the need to “sell” yourself.
3. A Bookkeeper and an Accountant Are Not the Same
Bookkeeping and accounting are not the same. Bookkeeping is more focused on individual financial transactions, while accounting is focused more on the bigger picture. Accountants interpret and analyze data, but bookkeepers do not.
To become an accountant, you need a bachelor’s degree, and you also need to pass a certification exam.
4. There Are Two Types of Bookkeeping
There are two main types of bookkeeping: single-entry and double-entry.
Single-entry is more common in companies that don’t have a lot of financial transactions or have very simple transactions. The single-entry system records expenses and any cash sales. Single-entry is generally not used for companies that have accounts payable, accounts receivable, and capital transactions.
Large businesses with more complex transactions use the double-entry system. All transactions are listed as either income or expenses, and then the second entry traces the transaction to the corresponding account that it came out of (for expenses) or went into (for income).
5. Bookkeeping Makes Audits and Taxes Easier
When your books are in good order, it makes it much easier to file taxes. Filing your taxes requires you to gather many different financial records, so when your bookkeeper has everything easily accessible, the process goes much smoother.
If you are audited, organized books also reduce stress and make it easier to answer the questions of auditors and provide any requested documents verifying income or expenses.
Bookkeeper 101: Everything You Ever Wanted to Know
Bookkeepers are integral to keeping businesses running successfully. Not only do they allow businesses to have a good handle on their finances, but they also make tax time and audits much easier.
If you are in need of bookkeeping services, contact us to learn more about our services and how we can help your business.