What does a bookkeeper do?

Discover what a bookkeeper does on a day-to-day basis and why their role is crucial for businesses. Learn about their responsibilities in recording and maintaining financial transactions, ensuring accuracy, and being the financial heartbeat of an organisation.

Bookkeeping is an essential aspect of managing a business’s finances and ensuring its financial health. But what exactly does a bookkeeper do on a day-to-day basis? Let’s dive into the role and responsibilities of a bookkeeper, and explore why their services are crucial for businesses.

A bookkeeper is a financial professional who is responsible for recording and maintaining a business’s financial transactions. Their primary role is to ensure that every financial transaction is accurately recorded and that all financial data is up-to-date and organised. Essentially, they serve as the financial heartbeat of an organisation.

Read also: What is bookkeeping?

A day in the life of a bookkeeper: responsibilities and tasks

So, what does a typical day in the life of a bookkeeper look like? One of the first tasks is often reconciling transactions from the previous day to ensure that the financial data aligns with the bank accounts and statements.

Throughout the day, a bookkeeper handles various duties, such as recording financial transactions, updating financial statements, and checking financial records for accuracy. They may also be involved in tasks like preparing invoices, processing payroll, and assisting with budget planning and forecasting. Additionally, bookkeepers play a crucial role in generating financial reports, including balance sheets, income statements, and cash flow statements.

Read also: Bookkeeper vs accountant: key differences

The difference between a bookkeeper and and an accountant

Bookkeepers and accountants are professionals who manage financial data for businesses, but their roles and responsibilities differ in several key aspects. Understanding these differences is important for businesses to ensure that their financial operations are handled appropriately.

Bookkeeper

The role of a bookkeeper is often more transactional and administrative in nature. They are responsible for the day-to-day financial tasks of the business, which include:

Recording financial transactions such as sales, purchases, receipts, and payments.

• Recording financial transactions such as sales, purchases, receipts, and payments.
• Maintaining and updating the general ledger and subsidiary ledgers.
• Reconciling bank accounts and financial statements.
• Managing accounts payable and receivable.
• Processing payroll and maintaining payroll records.
• Generating standard financial reports, such as profit and loss statements, balance sheets, and cash flow statements.
• Ensuring accuracy and completeness in financial records.

Bookkeeping is typically concerned with accurately capturing and organising all financial data that flows through a business. This record-keeping is the foundation upon which accounting systems are built.

Accountant

Accountants generally take on a more analytical, advisory, and strategic role. Their tasks often extend beyond the scope of day-to-day financial management into areas such as:

• Analysing financial data and reports for patterns, discrepancies, and opportunities.
• Offering financial advice and insights to support business planning and decision-making.
• Preparing more complex financial statements and reports, often using data provided by bookkeepers.
• Conducting audits to verify the accuracy of financial information and compliance with laws and regulations.Advising on tax strategy, preparing tax returns, and ensuring that the company is compliant with various tax requirements.
• Assisting in long-term financial planning, budgeting, and forecasting.
• Designing and evaluating financial controls and systems to improve business operations.

Accountants usually have higher-level certifications, such as a university degree in accounting or finance, and may hold professional designations like Certified Public Accountant (CPA) in the United States or Chartered Accountant (CA) in other countries such as Australia, the UK, and Canada.

Bookkeeping is largely about accurately recording the financial transactions of a business, while accounting involves interpreting, classifying, summarising, and communicating financial data. The accountant often relies on the accurate records maintained by the bookkeeper to perform their functions.

While a bookkeeper ensures that the financial records of a business are kept up-to-date, an accountant uses that information to provide insights and guidance on the financial status and strategy of the company. Both roles are crucial for successful financial management, though in a small business, these roles may overlap, or even be performed by the same individual due to resource constraints.

The duties of a bookkeeper

The duties of a bookkeeper can vary depending on the size and type of the business, as well as the specific needs of the company. However, some core responsibilities are fundamental to the bookkeeping role:

1. Recording Financial Transactions

One of the primary duties of a bookkeeper is to record all financial transactions, including sales, purchases, payments, and receipts, in the company ledger or accounting software. This task involves posting debits and credits, producing invoices, and managing payroll.

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2. Maintaining the General Ledger

A general ledger is a complete record of all the financial transactions of a business. The bookkeeper must ensure that it is always up-to-date and accurate. They are responsible for maintaining this central source of all the financial data.

3. Reconciliation

Bookkeepers regularly reconcile bank accounts and financial statements to ensure that the recorded amounts match the actual bank balances and that every transaction is accounted for. This helps in identifying and resolving any discrepancies or irregularities.

4. Managing Accounts Payable and Receivable

Managing incoming and outgoing payments is a critical duty of bookkeepers. This involves issuing invoices to customers, tracking unpaid invoices (accounts receivable), and ensuring that the business pays its bills on time (accounts payable).

5. Payroll Administration

Processing payroll involves calculating and distributing employee wages, as well as handling the withholding and payment of taxes and other deductions.

6. Preparing Financial Reports

Bookkeepers compile key financial reports such as profit and loss statements, balance sheets, and cash flow statements. These reports are essential for internal use by management and may also be required by external stakeholders.

7. Assisting with Budget Preparation

In some instances, a bookkeeper may also assist with setting up budgets based on historical financial data and projections.

8. Handling Tax Preparation

Bookkeepers prepare information for tax filings and may work with accountants to ensure that accurate financial information is used in the preparation of tax returns.

9. Managing Inventory

For businesses that carry stock, bookkeepers may keep an inventory ledger and help monitor stock levels to inform purchasing decisions.

10. Implementing Financial Controls

To safeguard a company’s assets, bookkeepers may help implement or improve internal financial controls and procedures.

11. Financial Analysis and Advice

Although primarily data entry, some bookkeepers also provide basic financial analysis and can offer insights about financial health, efficiency, and business trends.

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Understanding different types of bookkeeping

Bookkeeping is an intricate part of any business, ensuring accurate financial tracking and compliance with legal requirements. There are a few different systems and methods of bookkeeping that organisations can choose from, depending on their size, complexity, and specific needs. Here we take a look at the various types of bookkeeping systems:

1. Single-Entry Bookkeeping

Single-entry bookkeeping is the simplest form of bookkeeping, and as the name suggests, it involves recording each financial transaction with a single entry. It’s typically used by small businesses with minimal transactions. This method works much like a checkbook or a cashbook, recording transactions as either income or expenses, which provides a basic overview of the business’s financial position.

2. Double-Entry Bookkeeping

Double-entry bookkeeping is a more complex system, requiring each transaction to be entered twice, as both a debit and a credit, in two separate accounts. This method is globally recognised and is ideal for businesses of all sizes because it helps to ensure accuracy and balance in the financial records. It is the foundation for creating comprehensive financial statements and is crucial for businesses that need to manage a more detailed financial picture.

3. Virtual Bookkeeping

With the rise of technology, virtual bookkeeping has become popular. This type of bookkeeping involves using online software and tools to manage financial records and transactions. Virtual bookkeepers can work remotely to record daily transactions, reconcile accounts, and prepare financial reports, providing convenience and often cost savings for businesses.

4. Accrual Basis Bookkeeping

In the accrual basis of bookkeeping, revenue and expenses are recorded when they are earned or incurred, regardless of when the cash is actually received or paid. This system provides a more accurate picture of financial performance over a period of time and is typically used by businesses that have more complex accounting needs.

5. Cash Basis Bookkeeping

Contrary to the accrual basis, cash basis bookkeeping records transactions only when cash changes hands. This method is more straightforward and is often used by small businesses that do not have inventory or whose financial management does not require tracking receivables or payables.

6. Computerised Bookkeeping

Computerised bookkeeping utilises software to automate the recording of financial transactions. These systems can rapidly handle complex calculations and generate reports, providing efficiency and often integrating with other business systems for comprehensive management.

7. Cloud Bookkeeping

Similar to virtual bookkeeping but with an added layer of security and accessibility, cloud bookkeeping allows businesses to store and access their financial records on online platforms. It ensures that data is backed up and can be accessed remotely, which is especially useful for collaborative work environments or businesses with multiple locations.

When choosing a bookkeeping system, it’s important to consider factors including the complexity of your financial transactions, the size of your business, and your specific accounting requirements.

Should you have a bookkeeper?

Having a bookkeeper for a small to medium business comes with its own set of advantages and disadvantages. It’s important for business owners to weigh these before deciding whether or not to employ a bookkeeper.

Advantages of Having a Bookkeeper

1. Professional Expertise

Bookkeepers have specialized training and expertise in financial record-keeping. They are equipped to handle complex accounting tasks, ensuring that all financial transactions are recorded correctly and efficiently.

2. Time Savings

With a bookkeeper handling the day-to-day accounting tasks, business owners can free up significant time and focus on core business operations, such as strategy, marketing, and customer service.

3. Dependence on an Individual

If the bookkeeper is not well-vetted or lacks integrity, it could potentially lead to mismanagement of funds or financial discrepancies.

4. Privacy and Security Concerns

Bookkeepers have access to sensitive financial information, so there is a level of trust required. There’s also a need for proper data protection measures to be in place to secure confidential information.

5. Risk of Miscommunication:

If not effectively communicated, bookkeepers might not fully understand the specific needs and practices of the business, which could result in errors or oversight in financial reporting.

6. Software and System Discrepancies

If a bookkeeper is used to certain software or systems that differ from those of the business, there might be a learning curve and possible inefficiencies until they are fully acclimated.

For many small to medium businesses, the advantages of having a bookkeeper outweigh the disadvantages, especially when the business reaches a point where managing the books in-house is no longer practical or efficient. However, the decision ultimately depends on the specific needs and resources of the business. With advancements in technology, options such as part-time bookkeepers, outsourcing, and bookkeeping software have made it more accessible for businesses to manage their finances professionally without incurring the costs of a full-time employee.

A skilled bookkeeper must be detail-oriented, have a strong understanding of key financial principles, and be proficient with bookkeeping software. They need to maintain confidentiality, have strong organisational skills, communicate effectively, and consistently adhere to deadlines and legal requirements. The role of a bookkeeper is integral to the smooth financial operations of a business, and their meticulous work supports the overall financial strategy and health of the company.

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Elevate Your bookkeeping with Conta: your partner in free and efficient invoice management

At Conta, we understand the significance of robust bookkeeping practices and the impact they have on the efficiency and success of your business. That’s why we proudly offer our free invoice software program designed to simplify and streamline your bookkeeping processes. This user-friendly tool is tailored to the needs of Australian businesses, ensuring adherence to local standards and tax regulations.

With Conta’s software, you can create and manage your invoices effortlessly, maintain accurate records, and foster financial clarity without the financial burden of additional costs. Our commitment is to support your business by providing a reliable and cost-effective solution that enhances your bookkeeping operations, ensuring you have more time to focus on what matters most – growing your business.

Embracing Conta’s free software program as part of your bookkeeping routine can lead to improved financial management and can assist in keeping your business on the path to success. Let Conta be the partner you rely on for your bookkeeping needs, helping to drive your business forward with confidence and ease.

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