How Bookkeeping Plays an Import Role in Running Your Business?
Bookkeeping plays an important role in running your business. It records financial transactions of your business which includes purchases, sales, receipts & payments done by an individual or an organization. Some people think that bookkeeping & accounting is a same thing but they don’t know that there is a difference between an accountant and a bookkeeper and both have different roles & responsibilities.
Bookkeepers and Accountants are not the same
As an owner of a small business, there are lot of things which you have to do in order to run your business smoothly – Income generation, making customers happy, tracking & managing the financial information etc. but the biggest question arises is –who will you need to manage the accounts of your organization. Look, it’s totally depends upon you that whether you need a bookkeeper or an accountant or both. To answer this question, let me explain you the roles & responsibilities of an accountant and a bookkeeper in detail.
What an Accountant do?
The main activities performed by an accountant are as follows –
- Preparation & submitting of statutory returns
- Providing general & business financial advice
- Providing advice on structure of legal entity.
Accountants are usually members of statutory association. There are different names given to qualified & registered accountants such as Certified public accountants (CPA), Chartered accountants (CA’s) or other titles which totally depends upon the country they are living in.
What a Bookkeeper do?
Many duties & responsibilities are performed by a bookkeeper in an organization. The main activities performed by a bookkeeper includes –
- Recording of financial transactions
- Reporting of financial transactions
In the current scenario, bookkeepers have extended their range of duties which includes –
- Helping & training clients to use accounting software
- Developing, implementing, managing & reviewing the internal business processes.
- Capturing the daily transactions in a retail environment with the implementation of point of sale (POS) systems.
- Creating efficiencies within business with the implementation of document management & inventory control processes.
The tasks performed by a bookkeeper on day to day basis in order to run your business smoothly are as follows –
Maintaining Track of Daily Transactions
Bookkeeper records the business banking transactions on day to day basis. In case your organization is using accounting software containing daily automatic bank feeds, it is a great help for a bookkeeper. With the help of accounting software like Nomisma, it is very easy to keep an eye on cash flow as bank statement lines directly transferred to accounting software which saves much of your data entry time.
Prepare & Send Invoices as well as manages the Account Receivable Ledger
It is the bookkeeper’s responsibility to prepare & send invoices to clients. He also manages accounts receivable ledger and chasing clients in case of late payments.
Handles the Accounts Payable Ledger
Bookkeeper not only manages the accounts payable ledger but also make payments on behalf of your business which includes payment of petty cash, expenses & supplier invoices.
Keeps an eye on Cash Flow
One of the most important responsibilities of a bookkeeper is to ensure that the company doesn’t run out of cash. Therefore, bookkeeper should check the balances of revenue as well as expenses in order to ensure the smooth functioning of the organization. In case, company runs out of cash or need more cash, bookkeeper may take suitable action or an advice may serve the purpose.
Prepares the Books of Accounts for the Accountant
It’s a bookkeeper job to prepare books of accounts and to update it on daily basis. These books of accounts are submitted to the accountant and then accountant make business recommendations and complete the company tax returns by using their skills & knowledge efficiently. Bookkeepers perform tasks on daily basis so that accountant can concentrate on strategic financial operations. Accountants cannot do their job without a bookkeeper. Accountant without a bookkeeper is just like fish without water.
How Bookkeepers & Accountants work together?
Many businesses make use of both bookkeepers as well as accountants. Let us discuss how they operate –
Accountants are of great help in setting up a business. Accountants can help you in setting up your business plan as well as company structure that suits your business the best.
You can also take help from an accountant or a bookkeeper in choosing the right accounting software which should be beneficial for both – you & your employees.
After completion of the above tasks, bookkeeper focuses on making your company’s accounts up to date on daily basis.
Companies working on accounting software’s preferred using both bookkeeper and accountant for their organization. Collaboration of Bookkeeper and accountant can be beneficial for the organization as they both can work easily on the same set of data by using the shared access option. Accountant’s work is to check the figures of the accounts & bookkeeper’s work is to give explanation on numbers & decisions in case anything is not cleared to the accountant.
It is the responsibility of the accountant to give the clear picture of the financial health of the organization to the business owners and the board members through the reporting process. These reports are shared by the accountants so that business owners know where the business is going.
As per updated figures, accountant can provide recommendations and advices to the business owner and board members on any planned expansions and investments too. Accountant can also provide advices on right time of entering into a new market and helps in making other financial strategies too.
The information provided by the bookkeeper is used by the accountant to prepare company reports. Company reports include net profit, income & expenses, assets, liabilities & tax. Company tax return forms are also filed by the accountants. They are involved in making tax payments.
Five ways in which a Bookkeeper can help your business
In case you are running a small business and want some person to handle accounts on your behalf, bookkeeper is the best option as bookkeeper can perform lot of tasks on daily basis and incurred less cost in comparison to an accountant. Following are the five ways in which a bookkeeper can help your business –
Concentrate on Business Strategy
Bookkeeping involves tracking & recording of financial transactions either manually or in accounting software. It is better to do bookkeeping in accounting software as it saves much of your time. Sometimes, it’s not easy to see the clear picture on the basis on numbers. Hence, it is important to hire somebody to work on these numbers on daily basis.
Reduce Your Accounting Cost
In case you are using an accountant to handle your daily transactions as well as the monthly payroll. It’s better to use a bookkeeper as it saves lot of your money.
Extra Cautious while watching your Cash Flow
If you want to save your company from running out of cash, you need to keep an eye on cash flow on daily basis. In order to manage a cash flow on daily basis, bookkeeper is the best option as he not only manages the cash flow but also ensure that company will never go out of cash.
Quick Access to Vital Figures
Bookkeeper has a quick access to the important financial figures of the business and he can share it right away with you, whenever it is urgently needed. You don’t have to wait for the accountant’s response for any urgent finance information.
Keep Control of Your Financial Data
Only few businesses can afford their own accountant, therefore most of the accountants work on part time basis for their clients. If a company uses online accounting software to manage their finances, bookkeeper and an accountant can easily work together on the same set of data and proves beneficial for your business.
Therefore, bookkeeping plays an important role in today’s business. Your accounts will not be accurate and you will not get the clear picture of the company’s finances without proper bookkeeping. Hence, you will not be able to take the important business decisions of your organization.
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