Why Bookkeepers Are Important – 4 Essential Things They Do
Every business needs good housekeeping and a great bookkeeper. The financial health of any business, regardless of its size, can quickly get complex, and it’s the bookkeeper’s job to make things go smoother. Their duties are to ensure efficient accounting and tax compliance. If you’re researching what a bookkeeper does, then chances are you’re probably considering if you need one. In this article, you will find out more about the 4 essential things bookkeepers do.
Reconcile Your Bank Accounts
The most important thing, for a bookkeeper to do, is to reconcile your bank accounts. With that being said, account reconciliation means comparing and double-checking that transaction details in your accounting software match transaction details on your other financial statements.
The method of reconciliation depends on how businesses track their money.
Furthermore, it’s important to often reconcile your financial accounts to avoid fees, fraudulent charges, or incorrect transactions.
Manage Accounts Receivable and Payable
In case you are wondering what this means – here we go! Accounts receivable represents the money a customer owes you as a business for its goods or services. Whereas accounts payable represent the debt owed to a business, supplier, or vendor.
No matter if it’s creating invoices for accounts receivable or payable, bookkeepers process all of them.
That means the bookkeeper will handle all of the bills that your business receives. Bookkeepers note payment deadline, early payment discounts if available, and submit payment to vendors. They keep track of all cash flows and making sure you’re books are nice and tidy for possible audits.
Create Your Financial Statements
Financial statements are not just important for your business, but for potential future investors. Bookkeeper’s job is to prepare three types of statements – a balance sheet, the cash flow statement, and income statement.
A Balance sheet
A balance sheet is a report that shows a business’s assets, liabilities, and equities at any given time. Therefore, the information on your business’s balance sheet should reflect the formula of assets equaling the total equity plus liabilities. In other words, this financial statement represents what your company owns and owes at a specific point in time.
Cash flow statement
A bookkeeper will prepare this statement to shine a light on how your business conducts it’s operating, investing, and financing activities. Basically, to put it simply, it shows the cash flowing into and out of your business.
Income statements are mostly done quarterly or annually. These reports show your business’s revenue, expenses, and losses over a longer time span in order to show the company’s net profit or loss.
In order to do this, your bookkeeper will Total all revenue, all costs, and expenses for the period. After that, subtracting expenses and revenue would result in your business’s net profit.
Assist You with Tax Compliance
Last but not least, one of the important services that bookkeepers do is that, by default, they’re going to serve as a sort of translator between you and your certified public accountant or tax preparer. If your business doesn’t obey tax rules, the IRS will probably audit your books. Furthermore, they can review all taxpayer’s records during audits. A tax audit can last up to a few years, so a bookkeeper’s help may be useful for you – in order to avoid this.
And there you have it—essential skills that a bookkeeper can bring to your business. Your bookkeeper isn’t just doing simple data entry—as you know now, it is a lot more complicated than that.
Having a good bookkeeper can positively affect your business. They update you on your business’s bank accounts and track money, which can benefit your company in different ways.
If you are still wondering if you need a bookkeeper, contact YPTA and work with bookkeeping pros with over 20 years of experience.