It is the duty of every company, regardless of size, to accurately track and report the money flowing in and out of its accounts by way of sales, expenses, and payrolls, but many entrepreneurs lack the knowledge and experience necessary to make this happen.
Proper bookkeeping management is not only a necessity for complying with state and federal laws and file the tax returns, it’s the only way to completely study your business operations and cash flow so you can make wise financial decisions.
One of the most common causes of business failure has been poor accounting – but it’s also completely avoidable. So, how do you hire the right bookkeeper for your small business?
The internet has opened many doors for a small business easier than ever, so it’s hardly surprising that many of today’s busy entrepreneurs eventually find themselves burdened by make-shift bookkeeping systems that:
- are inaccurate, inefficient, and hopelessly behind schedule,
- regularly distract them from other vital areas of their business, and
- negatively impact their company’s financial performance
As an investment in the long-term success and proper functioning of your business, entrusting your finances to a reputable and perfect bookkeeping service is crucial – and finding the right fit begins with understanding the fact that some professional attributes are simply non-negotiable.
Finding the perfect bookkeeping service is not easy. It is very difficult to hire the best bookkeepers and would be illogical to hire without understanding what a bookkeeper does. This article will explain the bookkeeper’s duties and give guidelines for hiring a good one.
What does a Bookkeeper do?
The ultimate version is that bookkeepers give you a monthly snapshot of your business’s finances.
The information they give you represents the bedrock of your company’s financial health. Bookkeepers ensure that data is accurate and comprehensive, so it can inform your financial decisions and strategy.
Bookkeepers handle these four primary duties:
What do bookkeepers do?
The Four Primary Duties of Bookkeepers: Categorize all transactions, reconcile your bank accounts, prepare key financial statements, and handle bills and invoices.
- Categorize All Transactions
A bookkeeper gathers all your transactions from payroll, expenses, payment processors (like Stripe or PayPal), and more. They also make sure every transaction is accounted for and categorized correctly.
Aside: At Profitbooks, we write rules for transactions so they can be automatically categorized instead of doing it all by hand. That also explains why our services are more accurate than human-only services.
- Reconcile Your Bank Accounts
Between credit cards, banks, and other financial accounts, it’s easy for transactions to get lost, duplicated, or otherwise messed up. Part of a bookkeeper’s job is to reconcile all the transactions for those accounts to ensure everything agrees.
They’ll make sure the balances in your accounting software match up with the actual balances in your accounts and keep an eye on how all the money moves.
- Prepare Key Financial Statements for Your Business
Every business needs key financial statements regularly. Whether you’re showing them to potential investors in your startup, sending them to the Income Tax Department, or using them to make important financial decisions. A bookkeeper will prepare those documents and ensure on accuracy and completeness of the information. Those key statements include:
Income/Profit & Loss statement: The Income Statement lays out all of your revenues and expenses for the year.
Cash flow: Your cash flow statement shows how money moves into and out of your business.
Balance sheet: The balance sheet includes all of the assets, liabilities, and equity that exist in your business at a given time.
Plus a bonus, very-nice-to-have statement:
Burn reports: This is for the startups and other new companies to show them how quickly they’re spending cash (often venture capital) so they can understand how long they can sustain operations.
- Handle Bills and Invoices
On top of tracking and recording transactions, some bookkeepers will also manage your business’s bills and invoices. That often includes managing accounts payable and accounts receivable.
It is not an easy task to select the right bookkeeping service. Management needs a selection tool to guide them.
The perfect bookkeeping service has the following criteria:
Communication is the key to success. Your accounting and bookkeeping service must be able to examine your operations and financials to guide you to success.
A quality bookkeeping firm will have all the right credentials, but that doesn’t necessarily guarantee reliability. Look for companies with a long-standing presence in the market that consistently demonstrates their integrity, and ask the company about their current clients who can provide honest opinions on the timeliness, efficiency, and confidentiality of their services.
You should ask without any fear of a potential bookkeeper how they would handle a financial situation specific to your business.
Any of the professional bookkeepers should understand the significance of your company’s cash flow, income, expenses, assets, liabilities, and equity, but they should also be able to:
- provide real-time, customized financial reporting and analysis,
- offer insights and predictions into your financial progress as it relates to your goals, and
- make vital services like strategic planning, financial forecasting, and acquisition or expansion management available to your business
- Manual bookkeeping techniques won’t cut it in today’s digital world. Be sure the bookkeeper you choose is conversant with the latest developments in accounting software and cloud-based technology.
Don’t assume that every bookkeeper is fundamentally organized and detail-oriented! Although it tends to go with the region, experience plays a huge role in the efficient interpretation, organization, reporting, and retrieval of financial data – especially when there are multiple clients involved.
Ask the company about review policies and safety nets, and remember that the more streamlined your bookkeeping service’s operations are, the more positive impact it will have on your company’s bottom line.
- Good Communicator
It is expected that some bookkeepers are much better at dealing with numbers than they are with people, but the right bookkeeping service for your business must be adept at dealing with both. Make sure your bookkeeper communicates well and explains things in a way that makes sense to you.
Your business is as individual as you are, and a bookkeeper who adopts a one-size-fits-all approach to communication will be unlikely to meet your needs or expectations.
- Regularly Updates Knowledge
While most bookkeepers make the effort to stay updated about the evolving tax and business regulations that could affect your company and business, it shouldn’t end there. Look for a firm whose:
- business services, and
- technological savvy
are continually being upgraded and enhanced to keep your business at the forefront of your industry, and ahead of the competition.
- Understands Your Industry
Beyond the day-to-day management of your company’s accounting activities, your outsourced bookkeeper should have a solid understanding of the industry you’re in, and how it relates to your specific financial situation.
Their level of familiarity with the industry trends and operations will help the bookkeeping company to spot oversights and patterns in your data. And that can not only prevent reporting errors but also help you to capitalize on potential tax savings.
- Sees the Big Picture
Beyond suggesting valuable insights, money-saving strategies to maximize tax deductions, and minimize penalties and late fees, a perfect bookkeeping service is the one that can demonstrate big picture thinking. This can dramatically improve your long-term profitability.
Always know the fact that your success hinges on knowing the true costs of running your business. And effectively planning for:
- fundraising, and
- Prioritizes You
At the end of the day, you need a seasoned bookkeeper who’s willing to work for you. Prioritizing your business means being respectful of your time, maintaining a proactive approach to communication, and demonstrating the capacity to understand your professional objectives and your approach.
Spending some time investigating their customer service habits and client relations will ensure you choose the small business bookkeeper most likely to help you meet your financial goals.
What Makes a Good Bookkeeper?
Regardless of which bookkeeping solution you choose, there are a few things that every great bookkeeper should bring to the table. When weighing your options, focus on:
- Experienced and reliable.
- Passionate about helping your business grow.
- Able to translate your books so they make sense to you.
A perfect bookkeeper enables you to focus on planning your business and arms you with the right financial data to make those decisions. Insightful data that can help you grow, and grow better, is always worth investing in.
How Profitbooks can help you?
When you use our online bookkeeping service at ProfitBooks, you will spend less time analyzing your financial reports and more time making decisions that affect the growth of your company. With real-time financial reporting, you can create forecasts and make financial plans accordingly.
Instead of focusing on keeping track of your books, You will spend more time determining ways to increase your sales and expand the business. The best part is, we provide an easy-to-use accounting software totally free with our remote bookkeeping services.