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Bookkeeping is the activity or profession which includes documenting and preparing reports about financial activities. There are different scales of bookkeeping. These range from small businesses to international conglomerates. All of them need someone—a bookkeeper or an accountant—whose job it is to keep track of the finances.
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Bookkeepers differ from accountants in a number of ways. Moreover, a bookkeeper may be more cost-effective, depending on your needs. They have different certifications. Also, they take different ongoing training courses, and they work with different sets of software and record-keeping documentation. A general introduction to bookkeeping follows below. Use it to help yourself feel prepared when it is time to hire a bookkeeper for your business.
Bookkeeping Is Preparation of Documents
The single most important part of a bookkeeper’s job is preparing documentation. They use what are known as source documents for this work. These could be invoices, receipts, order forms, wage and tax records, and any other form of financial paperwork. The information from these documents is consolidated into a series of appropriate documents.
Sometimes bookkeepers use straightforward software, such as Excel. This is a common and popular method, especially for small businesses or for self-employed people. Other forms of recording are specialist software, such as QuickBooks or Sage Pay.
Other forms of bookkeeping include double-entry systems and ledger books. However, these tend to have fallen by the wayside with the advent of easy-to-use, widely available software.
It is important that any business keeps bookkeeping up to date, as falling behind could lead to a tricky situation. Trying to catch up on paying invoices, staff, or making purchase orders is sure to be a risk for most businesses. By the same token, waiting until the last minute to prepare documentation to accompany financial actions, like paying outstanding bills or producing end-of-year reports, could result in a skewed view of the company’s finances.
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Having a bookkeeper on your team to stay on top of all incoming and outgoing money means that they are responsible for creating and issuing documentation. It is one of the ways in which you can keep your company working efficiently. Moreover, having a bookkeeper allows you to keep your focus on providing the goods or services you are passionate about.
It Includes Storing Financial Information
Almost as important as recording incoming and outgoing money is knowing where and how to store source documentation. In the event of an audit, your company’s financial information should be accessible and complete. Missing receipts or invoices could seriously affect the situation. This is true even these documents they have been recorded onto your software and reports correctly.
Bookkeeping means taking on the responsibility of filing source documentation in a way that makes it quick to locate later on. Documents should be compiled in a system that allows your bookkeeper to find what is required at short notice. This will help to keep your company in the clear.
Another benefit is that if any mistakes are made—which does happen from time to time, as even bookkeepers are human—then it is simple enough to locate and fix the error. A decimal point in the wrong place can throw a financial report into disarray. But being able to go back and look at the paperwork the number came from will help to resolve issues quickly and efficiently.
Understand the Distinctions between Accounting and Bookkeeping
The language of accountancy can be confusing for outsiders. What’s more, it can be difficult to understand what each type of accountant does. The most straightforward way to think about bookkeeping is as the first level of accounting.
All accountants also have the ability to be bookkeepers. This is because they know how to read and interpret financial information. They can record it correctly and produce the right documentation. These are skills they learn as they train to be accountants.
Accountants are responsible for interpreting financial information and forecasting future trends. They have in-depth knowledge of taxation and financial laws. Bookkeepers have a more fixed role, in that they are responsible for recording and maintaining financial documentation. They may have a view on how you can improve your company’s financial health, but their prime purpose is to interpret and manage information.
Bookkeepers have different levels of certification. Even laypeople can be bookkeepers if they are comfortable reading and understanding financial documents.
Bookkeepers tend to be more affordable than accountants. Therefore, if your business requires only this service, it would be prudent to hire an accredited bookkeeper rather than a chartered accountant.
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Bookkeeping is different from accountancy. It is an activity that doesn’t require complicated or extended learning. Bookkeepers who are thorough, dedicated, and efficient are often more valuable to a small business than a highly qualified accountant.
Look for a bookkeeping service or an individual professional and get your financial documentation under control. Hand your record-keeping over to a bookkeeper so you can get on with running your business.