Bookkeepers create records of your financial activity in order to produce financial statements that are used by owners and managers to track the status of the business. To do this, a bookkeeper needs bank statements, receipts, bills, invoices, payroll information, and any other records of transactions a business makes.
Once all transactions have been recorded for the period, financial statements can be prepared.
The two most essential reports are the Profit and Loss Statement (aka, the P&L), and the Balance Sheet.
What are financial statements useful for?
The P&L compares income and expensese, enabling us to answer questions like...
... How profitable were we last month?
... What were our biggest expenses?... Have income and expenses changed much since the previous month?
... What can we expect for next month?
The Balance Sheet compares Assets with Liabilities and Equity, and it helps us answer other questions, like...
... How much cash do we have on hand?
... How much do customers/clients currently owe us?
... How much did we spend on new equipment last month?
... How much do we currently owe on our credit card?
... How much can I (the owner) withdraw from the company to pay myself?
How much does bookkeeping cost?Bookkeepers usually quote based on the volume of transactions you make each month, as well as on the extent of reports needed by the business owners and managers. Additional reports that may be needed for business management could include Accounts Recievable, Accounts Payable, Budget to Actuals, Payroll, and more. Depending on your particulars, bookkeeping quotes vary considerably. Small businesses' bookkeeping costs may range from $150-500 per month.
Why are financial records called "the books"?
Bookkeeping today is done using accounting software, but (of course) it used to be done in hard-copy books. The books originally included the Journal and Ledger. Journal and ledger reports can be generated in accounting software systems if you need to review them, but their entries/posts are updated automatically, saving time on the bookkeeper's clock.
Does a bookkeeper handle my business' money?
No, bookkeepers, typically do not handle a business' money. Usually, a bookkeeper merely prepares a report of outstanding payments that need to be made. Then an administrator prepares checks, and another manager must sign them.
Does a bookkeeper have access to my bank accounts?
A bookkeeper may need access to bank statements, but does not need (and should not have) access to the money in your business accounts. The only exception to this may be when a bookkeeper (usual an in-house bookkeeper who works as a full-time employee) is responsible for paying the business' bills. As an independent bookkeeper, Black Oak Bookkeeping does not offer services for money-handling.
Do I need accounting software?
That depends on the complexity of your business (and therefore the complexity of your books). Bookkeeping can be done in spreadsheets, but it requires a series of sheets to make a bookkeepers' workflow efficient, and a complex business may require extensive sheets that are beyond what a bookkeeper is willing to manage without a subscription to software.
Although software costs money, it is worth it when it saves you money because it saves your bookkeeper time on your clock.
I've always done my own bookkeeping; why would I need a bookkeeper?
A bookkeeper can work in conjunction with a tax preparer or a CPA to help optimize your tax deductions and help you save on your taxes. Whats more, a bookkeeper can also provide you with the financial statements that are required when applying for a business loan. Also, financial statements are invaluable for efficient business management - paying bills on time, collecting on accounts receivable, and preparing and managing a buddget.
Can I learn to do my own bookkeeping?
Of course! Anyone with the time and determination to do their own books can learn bookkeeping. Doing your own bookkeeping also empowers you with thorough knowledge of your finances. If you're interested in developing a deep understanding of the foundations of bookkeeping, check out the NACPB's Accounting Fundamentals course, or search online for other bookkeeping resources.
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