So… What is a Bookkeeper?

Are you a small business owner who has ever asked, “What is a bookkeeper, and what do they actually do?”.

You’re not alone. Most people have no idea what a bookkeeper is and what they actually do! The professional jargon we use can also make things that much more confusing. But fear no more, Reason Bookkeeping is here to help! We’ll go into depth on what a bookkeeper is, what bookkeepers actually do, and how they can help your small business.

Let’s dive right in. What is a bookkeeper? A bookkeeper is an accounting professional who is responsible for, in simple terms, the financial transaction recording and management of your business. When you operate your business, you spend money on things like inventory and equipment to provide products or services to your clients. When you make these transactions, a bookkeeper accurately records them in your “books” or “general ledger”, and they make sure the money is represented correctly. A bookkeeper essentially keeps track of money movement within your business, also known as your financial records. They practice something called “double-entry accounting”, which we’ll go into depth on another blog post.

In addition to transaction recording, or data entry, bookkeepers may also: manage your business’s receipts, monitor the flow of cash in your business, pay vendors you work with on your behalf (also known as ‘Accounts Receivable Management’), request and obtain payment from your clients (also known as ‘Accounts Payable Management’), review your bank accounts to ensure no transactions are missing, and prepare financial statements based on the data produced by your business’s financial transactions.

Now, why exactly is accurate transaction recording important? There are several reasons why keeping track of your transactions is valuable to your business. One reason is that accurate transaction recording, or clean books, leads to more accurate and insightful financial statements. We’ll go into depth on the different kinds of financial statements and what they mean in another blog post, but in the meantime, think about how useful it would be to know how much your business truly earns in one year, after paying for all your business expenses. Wouldn’t it also be helpful to know how much money you spend on things like inventory or stock, equipment, insurance, payroll, and more? This is where a bookkeeper can help. After accurately recording your business’s transactions for a specific period of time, typically a month, your bookkeeper will send you financial statements that show all of this information to you. When you have these detailed, in-depth financial statements available for review, you can make better business decisions to help you grow in the future.

Another reason accurate transaction recording is important is for tax season. When it’s time to pay your business’s taxes, having clean books means there is less catch-up and clean-up work you need to do in order to know how much you owe in taxes. On the other hand, having clean books also comes in handy if, and when, the IRS decides to audit your business. If your business has accurate books and proof to back up each transaction, the auditing process becomes easier and quicker.

Stay tuned for next week’s blog post, where we’ll continue to explore more bookkeeping topics!