What Does A Bookkeeper Do?
Whatever your business is, there are two things you will do – make money and spend money. A Bookkeeper is the one who helps you keep track of that. Generally speaking most Bookkeepers used dedicated software to keep track of your finances though there is no reason why you should not use a manual system if that is what you choose.
What Is A Bookkeeper
In a nutshell bookkeeper takes all your source documents – invoices, receipts, bank statements and the like and from those prepares your accounts, keeping track of all your transactions and making sure they are correct.
The terms ‘Bookkeeper’ and ‘Accountant’ are often used interchangeably but they are not the same thing at all and have very different roles.
The Difference between Accountants and Bookkeepers
Bookkeepers record the day to day financial activities of your business in detail. A good Bookkeeper will prepare regular reports so that you are fully aware of the financial health of your business at the moment when those reports were prepared. This helps you make the day to day decisions that keep your business moving forward according to your plans.
An Accountant looks at the bigger picture, taking an overview and helping you create the plans that your Bookkeeper will help you implement. An Accountant takes a more subjective view, looking at the longer term using the data provided by the Bookkeeper. They will advise on the financial policies of your business, handle your tax affairs to your best advantage and offering guidance on major decisions such as moving from Sole Trader to Limited Company.
In an ideal world your Bookkeeper and Accountant should have a close relationship with the Bookkeeper providing sound information and the Accountant managing the policies allowing you to focus on the development of your business.
What Does a Bookkeeper Actually Do?
On the surface it looks as if a Bookkeeper just records data from receipts and invoices, but there is much more to it than that. Expenses have to be allocated to the right area of the business, equally income must tracked and properly recorded. All financial transactions must be analysed and recorded to make sure all your deductions are legal and you comply with current regulations. They will also prepare the four key financial statements that help you understand where your business is financially:-
- Profit and Loss
- Cash Flow
- Balance Sheet
- Changes in Equity
They will also:-
- Record your fixed assets
- Ensure taxes are deducted and paid to HMRC
- Pay Invoices
- Monitoring purchases
- Record income and Bank deposits
- Monitor and chase debtors
- Reconcile the accounts each month
- Prepare financial statements
- Monitor your expenditure and income against budget
- Report on anything unusual
- Process Payroll
- Monitor interest and investments
- Managing business expenditure and loans
- Maintaining a record of asset depreciation
- Ensure funds are set aside for taxes
- Issue invoices
Do I Need a Bookkeeper?
Your expertise is in running your business, you need the information provided by a Bookkeeper to help you but your time is better spent doing what you do best.
Without sound information you cannot make good decisions, and bookkeeping is not just entering income and expenditure into a list. As your business grows it becomes more and more complex to make sure you are keeping on top of everything – a bookkeeper will do that for you.
If you don’t have good records for your accountants they will often have to prepare them at a vastly more expensive rate than a competent bookkeeper will charge. If you don’t need a full time bookkeeper you can bring in an outside bookkeeping service so you are getting all the help and expertise that you need at minimum cost.
The Benefits Of A Bookkeeper
There are many benefits to having a bookkeeper not least of which is peace of mind knowing your books are up to date and you won’t be rushing when taxes fall due.
For example you can:-
- Make better budgeting decisions, because you know where your money is going
- Have more time to focus on your business
- Be aware of the flow of your business through the year
- Understand how the costs of your business break down
- See where profits come from
A good Bookkeeper will also be up to date with all the latest regulations, they will be able to offer advice and guidance and be an invaluable support for your business.