Bookkeeping Services Guide

Since it’s difficult for non-accountants to know whether a bookkeeper has done a good job or not, it’s useful to have a checklist to check the work they’ve done.  This is my first attempt at putting together a monthly checklist that you can use to review some of the basics.  If any of these things aren’t finished then you should question why.

• Are all bank accounts reconciled and any old outstanding items examined?  You should be able to look at the reconciliation report and bank statement.  Compare the “cleared balance” with the ending balance on the bank statement.  Review the list of outstanding items to make sure there is nothing too old there, especially deposits.  Deposits shouldn’t be outstanding for any more than a few days or something is wrong.
• Does the Accounts Receivable aging agree to the Balance Sheet?  The aging lists each customer in detail and the total should agree to the total that appears on the Balance Sheet or Trial Balance.  Any old receivables should be examined to see if they are valid or if they should be written off.
• Any additions to the Fixed Asset accounts should be documented.  If a new piece of equipment or vehicle was purchased in the current month, the bookkeeper should have all of the paperwork related to that purchase such as the bill of sale and any financing/loan agreements.  You may want to make sure the new asset is added to the depreciation schedule.
• Make sure the Accounts Payable aging total agrees to the Balance Sheet or Trial Balance.  Any old payables should be reviewed to make sure they are valid.
• Any loans or notes payable accounts should be reconciled against statements from the bank or lender.  If the balances don’t agree it’s usually because the payment wasn’t divided up between principal and interest properly.
• The balance in Retained Earnings should never change during the year, so it should be the same at the end of each month.  The only time that it should change is the first month after the end of the year.
• Review the Income Statement, or Profit & Loss Statement.  There should not be a large balance in accounts such as “Miscellaneous Expense” or “Suspense”.  If there is a large balance in these types of accounts it means that the bookkeeper was either being lazy or didn’t know the proper account to post transactions to and didn’t bother finding out the correct accounts.
• There usually shouldn’t be any negative account balances.  Sometimes there is a legitimate reason, but any negative accounts should be investigated.
• Does the Net Income (or bottom line) make sense?  Most managers or business owners have a pretty good idea of what the profit should be and if the books show something completely different, then that discrepancy should be examined.  Maybe the books are correct or maybe the owner really knows his stuff, but without checking you will never know.

This checklist certainly isn’t complete, and it doesn’t get into the more technical things.  But if you go through these few things at the end of every month, your books will be in pretty good shape and you can have a little more faith in them.

A lot of people are interested in online bookkeeping courses but it’s hard to tell if the course is any good before you sign up.  What are the things that you should learn in this type of class?  Here’s how I would design a bookkeeping course.

In the early stages of the class I would teach the basic principals of accounting.  The different types of accounts, such as current assets, fixed assets, other assets, current and long-term liabilities and owner’s equity accounts.  You would learn the characteristics of each and how they all relate to each other.  This would lead into a discussion about debits and credits.  Why debits must equal credits, how they each affect different accounts, etc.

Once the basic accounting stuff had been covered and everyone in the class understood it well enough, we would go on to cover how things work in the real world.  What to expect when you get your first job as a bookkeeper.  Things like how to process bills from vendors all the way from receiving the bill in the mail to the end result of paying the bill.  How to record the company’s sales, keep track of the accounts receivables (if any) and deposit money properly.  This section would also go over how to develop an efficient filing system that was well organized.  This is critical so that you can easily find whatever document you need to substantiate the financial transactions.

How to prepare basic financial statements would be next.  How to put together a Balance Sheet, Income Statement and Statement of Cash Flow is something that every good bookkeeper should know.  How they all tie together and how to analyze the reports to determine the company’s financial health.

Now that all those areas have been covered, it would be time for some more practical education, learning how to use QuickBooks.  Since 80% – 90% of small businesses use Intuit’s QuickBooks, this software should be taught to all accounting and bookkeeping students.  The concepts that people learn here can be transferred to almost any other accounting package, so the information is valuable to all students.

So that’s my idea of a good bookkeeping course.  It would be a mixture of traditional accounting education and practical, real world scenarios.  I find that too many people learn accounting theory without learning how to apply those theories once they get a job and are working in a real office.  Learning about processing receivables and payables, filing and how to use QuickBooks will go a long way in filling this gap.

What do you all think of my plan?  What would you do differently?  Let me know in the comments section!

So we’ve covered what to expect from a service and why you should hire one, but now I’m going to discuss how the work actually gets done.  There are several different ways that it can work, depending on the specific needs of the client.

One of the most common scenarious is to have a part-time bookkeeper come into your office on a regular basis.  Sometimes once a week is sufficient, sometimes there is enough work to be done that 3 times a week is necessary.  Regardless of how often it is, the accountant/bookkeeper will come in and record all the activity that occurred since the last time they were in.  The client information rarely leaves the office and the work is all done at the client site.

Another common approach is for the business to mail all of their information into the bookkeeper’s office to be done there.  This is most often on a monthly basis, so the monthly bank account can be reconciled.  For this system to work, the business owner must not need their records to be up to date at all times.  This will also not work well for a business that has a lot of activity each month.  For a really busy client it is better for the bookkeeping to be done on a more regular basis.

There is a variation of the monthly off-site system that works well for some clients that need udpated books more often than monthly, but still don’t need or want a bookkeeper coming into their office.  It involves the client sending their information to the accounting firm via mail or over the internet weekly.  The accountant will update the accounting system and send the client updated reports.

Another way to do this is to have the accounting software available to both the client and the accountant over the internet.  The client inputs some transactions and the accountant fills in any missing information and makes sure the accounts are kept accurately at all times.  This is probably the best type of system but it is also the most difficult to implement and the most costly.  It usually involves some type of third-party hosting of the accounting software.

As you can see, there are many different ways to implement a bookkeeping service into your business.  One of the systems mentioned above is sure to fit the needs of your business.  It all depends on how often you need your books to be updated and how much you are willing to spend.

A good accounting firm will offer all of these different systems as an option for you.  If they are not willing or able to do so, you may want to ask them why and consider finding a firm that will.