Do you think you can do bookkeeping on your own? What exactly is a bookkeeper anyway? What does he/she do? And why would you need one? To someone not familiar with bookkeeping, these are all valid questions. But I will clear them all up now with one answer: yes, you need a bookkeeper. Not only do you need a bookkeeper, but you need a good bookkeeper.
In figuring out how to describe what it is that I do all day, I thought I’d look up the definition of a bookkeeper in the dictionary. The Merriam Webster dictionary definition of a bookkeeper is “a person who records the accounts or transactions of a business.” This definition is correct; however, a good bookkeeper does much more than just recording transactions. At our very cores, we are highly detailed. We enjoy the comfort of routine tasks. We are problem solvers. We act as liaisons between business owners and accountants. We are financial strategists and we get things done – not the easy way, the right way.
There are two kinds of bookkeepers – a basic bookkeeper and a full-charge bookkeeper. A basic bookkeeper should have knowledge of accounts payable (money going out the door), accounts receivable (money coming in), inventory, purchasing and a basic knowledge of how the general ledger works. This type of bookkeeper does a lot of data entry, filing and routine work. Large businesses often hire four or five basic bookkeepers, each with a focus in just one area. For example, one bookkeeper will handle all accounts payable while a different one handles inventory.
A full-charge bookkeeper should know each basic bookkeeping area expertly, along with: how to process payroll and report the taxes, human resources functions such as benefits and the laws regarding them, how to adjust the general ledger, the difference between recording expenses and when the cash is paid out, which inventory system is used, purchasing items and when to record them, sales tax, depreciation, financial statement preparation, etc. The list goes on and on. As you can see, a full-charge bookkeeper needs to be well-rounded and must understand every single aspect of the business in order to do his/her job properly.
One last but critical aspect of bookkeeping is knowing how to report the financial information and who to report it to. Supervisors might be interested in ratios and calculations, so you’ll need very detailed spreadsheets with lots of information. Owners usually just want a summary, so spreadsheets will need to be scaled back and simplified. Accountants aren’t much into the details of the final numbers, but they need to know that the data in those final numbers is actually correct.
Some businesses think they don’t need a bookkeeper or that they can save some money by just doing it themselves. I’m a tad biased since I am a bookkeeper, but I would argue that every single business, big or small, needs a bookkeeper. Business owners normally focus on growing their business and don’t have time to keep records organized. But if you don’t have good records, how can you make financially sound decisions? Do you know where your money is coming from? Do you know where it’s going? Do you know which client or product is the most profitable? Do you know where you’re losing money? A good bookkeeper not only can find all of this information, but can help to keep the finances of the business running smoothly.