Bookkeepers can help your business with day-to-day accounts like recording sales and other transactions but they can do a lot more too. So when does it make sense to hire a bookkeeper? Go though our detailed article here.
What is Bookkeeping?
As per the definition of bookkeeping, it is nothing but an ongoing record of the financial transactions conducted by the business, including purchases and sales and all forms of expenditure and income. Bookkeeping has got its name from the way it was done before the bookkeeping software were introduced, which was to keep the records in physical books, that were also called as account books and thus the name “bookkeeping” came into existence. If bookkeeping has to be defined in accounting terminology, then it is the recording of financial transactions and is a part of accounting process in a business.
United Kingdom has its unique way of bookkeeping and it is not a choice but rather a legal requirement for all form of businesses i.e. Sole Traders, limited companies and partnerships and has a dedicated institute to promote the bookkeeping profession worldwide and is known as The Institute of Certified Bookkeepers (ICBI). Founded in the year 1996, the institute has the objective of promoting bookkeeping as a profession worldwide and also to increase recognition for bookkeeping as an integral part of financial profession.
The Tasks of a Bookkeeper
In general, the tasks of a bookkeeper majorly include working closely with the accounting team in order to create and analyze financial reports and to ensure legal requirements compliance. Apart from this, tasks of bookkeepers also involve dealing with purchase orders and invoicing, sales accounting and credit control, payroll accounting etc to name a few. In broader terms, tasks of a bookkeeper could be summarized as mentioned below:
- To record transactions: As a bookkeeper, you are required to make a record of all incoming and outgoing transactions and while you make the record of transactions, you should make sure that the records are clear enough to allow access to an accountant or HMRC representative, if needed.
- To copy all financial information: From the many tasks that a bookkeeper has to do, copying all financial transactions is one of the very important one. As a bookkeeper, you must make copies of all financial transactions.
To manage employee’s pay: It is duty of a bookkeeper to calculate the payment due and also to calculate National Insurance Contributions and Income Tax that has to be paid on employee’s salary to the HMRC.
- To calculate VAT: If you are working with a business that is VAT registered, then it is your duty to calculate and record the applicable VAT on monthly as well as quarterly basis.
- To file tax returns: Bookkeepers are of great help, especially to the sole traders in filing and submitting their self-assessment tax returns at the end of every financial year.
Why Do You Need a Bookkeeper
When you start a business of your own you are very excited and have to wear many hats starting from marketing of your brand, raising funds for your business, doing accounting and bookkeeping etc. However, with time, you find that you are spending more time in taking care of tedious and time-consuming tasks such as bookkeeping and administrative tasks, whereas tasks which actually need your attention are being ignored. Without a proper bookkeeper, chances are high that your transactions are not being recorded and you have missed out the deadline of self-assessment tax returns.
Thus, it is important to hire a bookkeeper who can help you in lightening the load on the business by taking care of bookkeeping.
How Bookkeepers Are Different From Accountants?
Although bookkeepers and accountants are often used interchangeably, however both are quite different from each other, despite the fact that bookkeeping is an integral of accounting. Where a bookkeeper’s main role is to keep a record of all financial transactions and to process them into a software system and help run the business by paying bills and chasing the customers for payments; accountants deal with higher level compliance such as filing accounts and to conduct tax planning in order to minimize business and personal tax liabilities. A bookkeeper’s job is a stand-alone service while accountants might have a range of team members.
A Detailed View of Your Business
As mentioned above, a bookkeeper works with the accountants of your business and helps run the business wheel smoothly by ensuring that all bills are paid well in time and by chasing customers for making payments for the services or goods availed from you. With the introduction of cloud based bookkeeping and accounting software, the bookkeepers can have access to financial data from anywhere and thus can share financial reports about the current financial status of your business. Job of a bookkeeper is to record all financial transactions i.e. incoming and outgoing payments and thus they are the ones who can give you correct answers of your questions about from where the money is coming and going to. A bookkeeper, by virtue of his duties and tasks assigned will always have a detailed view of your business and should be the constant accounting contact for your business.
As a Sole Trader or Small Business Owner, When You Should Hire a Bookkeeper?
Bookkeeping is a task which does not require a high level of intelligence quotient and ample time by your side to take care of all the bookkeeping processes because howsoever simple the bookkeeping tasks might appear, the person should be immaculate in his approach to take care of tedious and oh-not-so-very interesting bookkeeping tasks. It is not very unusual that sole traders and small business owners would first like to try their hands on bookkeeping simply to utilize the limited fund available by their side; however it is not a task which can be, and rather should be done just like that. So, it is always better to hire a bookkeeper as early as possible because it is always easy to start right than to undo a wrong start. If you will take more time to hire a bookkeeper, he will be having several months of pending and unprocessed receipts and invoices to deal with and apart from time, it will also cost you more money. Thus, hiring a right bookkeeper in the beginning does not cost you money, but in real it saves your money, time and trouble and pain that you might have to bear later on.
Finding the Right Person
If you have hired a bookkeeper and don’t know if he or she is the right person for your business, then you are might be doing more harm to your business than by doing the bookkeeping by yourself. In today’s world, everything has to be taken with a pinch of salt and when it comes to trusting someone with your financial transactions and record, you should be careful with it with all your life. Thanks to the policy of United Kingdom where bookkeeping is not an optional but rather a mandatory practice, there are plenty of bookkeeping service providers you can choose from depending on your business requirements and in case you are not sure which one to go for, you can always ask your clients or business partners for recommendations. Another way to find out a right bookkeeper for yourself is to check with your accountant, because half of the battle is won if you can find a bookkeeper who is well-versed and using the same accounting software as your accountant. Apart from checking on the accounting software, the shortlisted accountants should also be checked for the following:
- Check their past work records.
- Normally a good bookkeeper will have recommendations and it is always better to contact their referees and meet them in person, if possible.
- Finally, it is always better to have a personal informal meeting with the proposed bookkeeper, which will help to break the ice and understand the responsibilities and expectations in a better way.
Get the Best Out Of Business
A good bookkeeper will always help you in running your business smoothly by taking care of detailed and tedious tasks such as keeping record of your transactions and filing your VAT and other returns well within time and thus help to run your business machinery without any hiccups. If your bookkeeping is in best of its shape, it will help you to get the required information in real time and thus offer you new and detailed insight of your business. With the help of real-time information, you feel better and confident and can make better and informed financial decisions.
How Nomisma Solution Cloud Accounting Software will help Bookkeepers?
Our Cloud Accounting Software is enriched with features such as automated bank reconciliation system, which provides bulk upload and sending facility for sales and purchase invoices and thus helps to a large extent in reducing the time you spend on bookkeeping tasks. Other features of the software include customizable outputs, VAT submissions, easy reimbursement, real time cash flow position etc which is not than a real blessing for a bookkeeper. Also, ever since HMRC has introduced Making Tax Digital, it has become all the more important to have a software which is in compliance with the Making Tax Digital initiative of the HMRC.