Properly managing and organizing your small-business finances will help ensure that you are hitting your profit goals, staying legally compliant, and will overall contribute to the success of your business. Accurate and thorough financial bookkeeping is critical for all business owners in all industries, from the self-employed freelancer to small solo entrepreneurs, up to mid and large-sized businesses as well as not-for-profit organizations. Every aspect of a company is affected by its finances, so having a clear and accurate picture of these records is key to a company’s health and success.
Bookkeeping services can support you with everything from simple bookkeeping (hello, data entry!) to offering more in-depth tax filing services and business consulting. In handling simple bookkeeping services, bookkeepers keep precise records of a businesses’ financial transactions in the company’s accounting records. Ultimately, a skilled bookkeeper will save you time and money, set you up with systems that will simplify running a small business, keep you tax compliant and ready, and ensure you are always in-the-know when it comes to your financials.
What does a bookkeeper do for a small business?
A bookkeeper will keep your company’s financial records accurate and up-to-date by performing basic bookkeeping services. This includes regularly reviewing source documents such as your monthly bank and credit card statements, invoices, payroll, and receipts, and recording basic accounting information for you – such as your monthly reconciliations – in your company’s books.
A bookkeeper will review vendor payments and record expenses to manage your spending, helping you manage your cash flow. A bookkeeper will track your sales, so you know what’s most profitable and can focus on what works. Finally, many bookkeepers can assist with your taxes – helping you maximize deductions and stay compliant.
Managing a company’s financial data includes keeping the Chart of Accounts, General Ledger, and the company journals up to date and accurate. Bookkeepers provide business owners with regular financial statements including Profit & Loss Statements and Balance Sheets. They will keep your books organized and accurate so you always have easy access to the most up-to-date information on your company’s finances. A bookkeeper will take care of the administrative details, so you can focus on running your business and doing the parts that you do best – or perhaps even taking a day off!
Why do small businesses need professional bookkeeping services?
Nearly 25% of businesses are behind on their books. One of the most essential services a bookkeeper can provide for a business owner is to keep the company’s books accurate and up-to-date. Being able to quickly and easily review the status of your finances is crucial to short and long term success for any business owner. When you know the health of your finances, you can make decisions quicker concerning everything from who to hire next, to what marketing strategy recently worked best. It truly informs all aspects of a healthy business.
Many business owners dive into basic bookkeeping services on their own – thinking perhaps it’s basic data entry, what can go wrong? But, it is incredibly easy to make mistakes when you aren’t a professional bookkeeper, and these mistakes can cost you a lot of time. When it comes time to speak with a lender, make a big decision, prepare your taxes, or just wrap up your monthly reconciliation you might end up having to undo an entire month’s worth of data entry – or likely even more due to one little mistake. One simple slip-up can have a huge ripple effect and cost a busy business owner a massive amount of time that would be better spent elsewhere.
Bookkeeping may seem simple but it can help you with the big picture aspects of running a company – such as financing your business. As you grow you may want to borrow money or open a line of credit. Your lender will want accurate financial statements, and ideally, you aren’t scrambling to create them right then and there. With a professional bookkeeper on your side, you can quickly access all financial statements necessary as soon as you need them.
How much does a bookkeeper cost for a small business?
Small business bookkeeping fees vary depending on several factors related to your company, and to the bookkeeping service you’re considering working with. The size of your business and the amount of monthly expenses you incur plays a large role in estimating the pricing for bookkeeping services. Another major factor is if you are also looking for support with your taxes.
You’ll want to consider the bookkeepers’ expertise level, types of services they offer, technology integration offerings, and what industries or niches they serve. The bookkeeper might take into consideration details like what technology you’re already set up with if you’re running on an accrual or a cash basis, and the legal structure of your business.
For example, a bookkeeper that does routine data entry charges less than a CPA (Certified Public Accountant) who’s highly qualified to advise on business strategy, tax planning, and more. Traditionally, bookkeepers have charged an hourly rate; the more time they spend on your books, the more you have to pay – $30-90/hour. You may only need an accountant for an occasional project such as tax preparation, audit, or financial statements.
A very popular option with small businesses is an accounting service that charges a fixed amount every month. It’s easy to budget for, and it can cost less than half what you would pay an hourly accountant for the same amount of service. That’s why Xendoo offers this pricing structure to our clients.
Do I need a bookkeeper if I have QuickBooks or Xero?
As your business grows, your small transactions also increase. If you’re posting more transactions each month, entering data can make bookkeeping more difficult and time-consuming. Even when you use QuickBooks or Xero a bookkeeper can help you manage and maintain your books accurately and save you a large amount of time.
What accounting services do small businesses need?
With so many business accounting software choices now available, you may assume that letting your computer do everything will be cheaper than the cost of accounting services. And you may be right. But some things still need an expert human being — who can save you significant money, time, and hassle.
- Tax savings advice, such as when to make capital purchases, what you can deduct, and how to reduce taxes on capital gains
- Answer your questions about financial reports, cash flow, depreciation, and other accounting processes
- Identify opportunities to improve profit margin and business growth
- Help set up systems for business accounting and teach you best practices
- Keep you legal, prevent missed deadlines and noncompliance penalties
How much time do small business owners spend on bookkeeping?
Small business owners notoriously spend a large amount of time on administrative work, like employee scheduling, preparing payroll, and especially hours and hours of bookkeeping. It is estimated that SMBs spend 120 working days per year on these administrative tasks and bookkeeping. This is time that could be spent doing the work you love that led you to start a small business in the first place.
What’s the difference between bookkeeping services and accounting services?
Bookkeeping focuses on the everyday tasks that maintain your business’s finances while accounting for small business considers the big picture strategy to keep your business strong and growing. Bookkeeping tracks and records important financial information. Accounting puts that information to good use.
The traditional role of a small business bookkeeper involves managing the day-to-day financial record keeping of a business. As the name implies, they are truly keeping the books. That means transactions get plugged into the QuickBooks or whichever accounting software is being used. Spreadsheets are updated. Bank statements get reconciled at the end of each month. And, financial statements are prepared. In small businesses especially, you’ll often see bookkeepers paying bills, cutting checks to employees, invoicing clients, and making deposits.
Small business accounting involves analyzing the business’s financial trends and forecasts to advise business owners of ways to keep the operation financially sound. They also work to prepare for and minimize your small business taxes. This involves putting together monthly and quarterly statements and making quarterly tax filings. At least, those are the traditional roles of an accountant and a bookkeeper.
Can a bookkeeper do tax returns?
Certain states are stepping in to define who can or cannot claim to be an accountant. For instance, in some states, like Texas, a person must be a certified public accountant to even be able to call him or herself an accountant. Other states only require you to have a degree in accounting. Accountants have the title of Certified Public Accountant (CPA) and offer a higher level of financial analysis and can prepare and file taxes.
Do I need a bookkeeper and an accountant?
Ultimately, it’s best for you and your business to have both a bookkeeper and an accountant. Their varied perspectives on your finances can help ensure you’re able to anticipate problems and have the appropriate solutions ready to go. To hire just one or the other could leave you with an incomplete picture of your company’s financial health. The more eyes looking out for your business, the better.
Accountants have the title of Certified Public Accountant (CPA) and offer a higher level of financial analysis. They interpret the data recorded by the bookkeeper to make business decisions.
Their services include:
- Preparing financial statements
- Identifying red flags and growth opportunities
- Preparing and filing taxes
- Planning capital purchases and other investments
- Strategy for scaling the business
What does a bookkeeper do daily?
Bookkeepers handle the day-to-day recording and implementation of financial transactions.
Depending on your type of business, their tasks may include:
- Recording sales
- Accounts receivable — send invoices and track customers’ payments
- Accounts payable — verify, record and pay invoices from the company’s suppliers
- Paying overhead expenses — rent, utilities, etc.
- Paying debt installments — credit cards, business loans
- Reconciling bank statements
- Tracking inventory to prevent too much or too little on hand
- Preparing payroll
- Submitting government reports — employee tax, sales tax, etc.
- Recording capital expenditures such as buying equipment
- Recording asset depreciation
No special education or qualifications are necessary for these basic data entry tasks; with the right software, anyone can do it. However, you may want to bring in a professional bookkeeper for the following scenarios:
- Implement software tools to improve workflow
- Train employees to use bookkeeping software correctly
- Find and resolve mistakes in the books
- Get you caught up if you’re behind in your bookkeeping
- Set up a tax recording system