Bookkeeping Services Guide

If you’re reading this article, I’m going to assume that you are a small business owner.  I think that’s a fair assumption because if you were part of a large company, you would have your own internal bookkeeping and accounting department.  Many small businesses consist or one or two people and don’t have a full-time accountant or bookkeeper on staff.  If you’re a one-man operation I’m going to tell you right now that it is in your best interest to not do your own books and hire a professional to do it for you.

The main reason that small business owners don’t like to outsource the bookkeeping function is that it’s “too expensive”.  I’m going to refute that notion right off the bat.  If you’re like most small business owners that I’ve dealt with, you generate most (or all) of the revenue for your company.  That makes your time pretty valuable, right?  So why would you spend your valuable time fumbling around with checkbook balances and debits and credits?  Also, if you’re like most small business owners that I know, you absolutely suck at accounting and bookkeeping!  You’ve had no formal training and have no idea what you’re doing.  You waste a lot of time on it and still don’t get it right!

Hiring a trained, qualified professional to take care of your bookkeeping is a no-brainer!  It frees up more of your time so that you can generate more revenue (or maybe even play more golf!)  It also makes it much more likely that your accounting records will be up to date and accurate.  Sure, paying for bookkeeping services costs money, but it’s cheaper and much more efficient than doing it yourself.  I’m a believer that you should outsource everything other than your core business.  If it’s not something you specialize in, then pay someone else to do it.  It will pay off in the long run.

One benefit of having a professional do your books for you is that when it comes time to do your taxes at the end of the year, your books are in good order.  This means that the even more expensive CPA that prepares your tax returns spends less time on them and charges you less.  Just make sure that you point out to your tax preparer that you have hired a good bookkeeper, so it should take them less time than in prior years.

Hopefully I’ve convinced you to hand over the bookeeping function to a professional and stop wasting your own time trying to be an accountant when you are a much better salesman (or whatever it is that you do!)  So, how do you know if you are hiring a good bookkeeper?  I think that’s an excellent topic for another post!  Look for it soon.  In the meantime, please drop me a comment below if you have any questions or comments.

Bookkeeping is essential to any business, yet many business owners and managers know very little about it.  It is often viewed as a necessary evil, something that is an expense to the company but doesn’t add any value.  I don’t agree with this assessment at all.  If the company’s bookkeeping is done properly, it will provide a wealth of information in the form of financial reports that management can use to improve the company’s performance.  The problem is that many companies don’t have good bookkeepers and they don’t even know it because they don’t pay any attention to it or know anything about it.  So in this article I will try to explain some of the important aspects of bookkeeping.

Bookkeeping can involve many different duties, but it mostly involves doing the accounting work for a business.  The act of recording the company’s financial activity and keeping that information in an organized accounting system is the major responsibility of a bookkeeper.  Every check that is written, every credit card charge, loan payment, bank deposit and more needs to be verified, recorded and reconciled on an ongoing basis.  Let’s look at the major areas of work involved.

Recording of transactions

A proper bookkeeping service will record every financial transaction that happens in the business.  This includes things like checks, cash withdrawals, credit card charges, payments to vendors, invoices issued to customers, payments received, accounts payable, accounts receivable, bank transfer, bank charges, bank deposits, loans and more.  All of this activity should be recorded in some type of accounting system.  Most modern businesses will have a computerized bookkeeping system like QuickBooks or Peachtree, but some still use old-fashioned paper-based systems or spreadsheets like Microsoft Excel.

Reconciling Accounts

After all of these transactions are recorded, they should be reconciled against some type of third-party statement.  The most common example of this is the monthly bank statement.  A good bookkeeper will compare the transactions that appear on the bank statement to the ones that they have recorded in their accounting system.  They will correct any errors or omissions and verify that the balance at the end of the statement agrees to the balance on their books.  This account reconciliation can be performed for bank accounts, credit cards, loans, accounts payable and notes payable and any other account where a statement is received from an outside party.

Reviewing the Trial Balance

A sample Trial Balance Report

The trial balance is a report that simply lists each account and it’s current balance.  It usually lists one column for debit balances and another for credit balances (I’ll explain the difference in a later post).  A good bookkeeper will review these balances regularly to see if anything looks obviously wrong or out of whack.  This is an easy way to spot major errors that if left unchecked for too long, could turn into a major problem that is more difficult to correct.

Filing and Organizing

A bookkeeper’s job doesn’t just involve keeping the accounting system in good shape, it also involves maintaining an organized, complete filing system of supporting documents.  Documents that a bookkeeper should keep on hand include bank statements, credit card statements, vendor bills, loan documents, car lease contracts, etc.  If there is ever a question about a balance or specific transaction in the accounting general ledger, a good bookkeeper will have a paper trail that explains everything in detail.

So that’s what a bookkeeping service is, in a nutshell.  Of course there are many, many more details involved but those will be covered in future posts here.  I would love to hear from you, dear readers.  If you have any questions or comments please fill out a comment below.