What Does a Bookkeeper Do?

If you own a business, chances are you hear the words ‘bookkeeping’ and ‘bookkeeper’ thrown around quite a lot. Bookkeeping is generally used interchangeably with accounting in general, but what do bookkeepers actually do, and why is bookkeeping important?

In this guide we will explain what is bookkeeping, what does a bookkeeper do and how bookkeeping supports compliance, organisation and profitability in the long-run.

What is Bookkeeping?

Bookkeeping is the recording, organising and maintaining of a business’s financial transactions. Simply put, it’s keeping track of the money going in and out of your business. Bookkeeping involves accurately recording every sale made, purchase spent, payment received and expense incurred.

The easiest way to explain it is that bookkeeping is the financial glue that holds a business together. Without bookkeeping, it is almost impossible to produce accurate accounts, submit tax returns on time or make confident financial decisions. Bookkeeping provides the groundwork that accountants use to analyse your business’s finances.

What Does a Bookkeeper Do?

As mentioned previously, a bookkeeper’s role is to manage your bookkeeping records. This means that they will organise and maintain your financial information either daily or weekly depending on your business needs. They ensure that all your financial information is correct, up to date and allocated to the correct accounts.

The most common duty of a bookkeeper is to record your financial transactions. Sales income, business expenses, supplier payments and customer receipts are all recorded through bookkeeping software. Accuracy is vital, as mistakes could cause confusion when you need to prepare your annual accounts or submit your tax returns.

Bookkeepers usually take care of any invoicing and payments within your business too. This includes raising sales invoices, entering payments received from customers, and chasing outstanding balances. On the expenses side of your bookkeeping, they’ll record any supplier bills and ensure they are paid on time. Bookkeeping helps you to stay on top of your cashflow and prevent any unnecessary pressure on your business.

Bank reconciliation is another crucial task carried out by bookkeepers. Bank reconciliation ensures your bookkeeping records match up to your actual bank statements. They will cross-check all entries to make sure the money in the books is equal to the money in the bank. Bank reconciliation helps to spot errors or omissions and allows your bookkeeper to amend them. Bookkeepers also store financial paperwork in an organised manner, ensuring that you keep all of your receipts, invoices, expense claims and bank statements safe. Efficient bookkeeping allows your bookkeeper to store digital or physical copies of these documents neatly, should they be required for future reference such as tax returns or audits.

For businesses who are VAT registered, part of a bookkeeper’s role will include dealing with your business’s VAT. Bookkeepers track the VAT on sales and purchases, and prepare your books for VAT returns. An accountant may complete or send your VAT return to HMRC, but your bookkeeper will make sure your business is complying with all of HMRC’s regulations including Making Tax Digital.

Some bookkeepers will also aid in payroll. From entering payments to your staff, keeping on top of pension contributions and ensuring payroll transactions are recorded in your bookkeeping software.

The Difference Between a Bookkeeper and Accountant

Bookkeeping and accounting go hand-in-hand but they aren’t completely the same thing. Bookkeepers are responsible for accurately recording and organising financial transactions. Bookkeeping is the day-to-day tasks of ensuring your business’s finances are up to date.

Accountants usually take the data that bookkeepers feed them and use it to create analyses, annual accounts, tax planning advice, and general financial recommendations. Although they work closely together, bookkeeping and accounting are two separate professions.

Why is Bookkeeping Important?

Good bookkeeping provides confidence, control, and clarity for business owners. With organised and up-to-date financial records, you will start to see many benefits:

• Clear finances - Always be aware of your income, expenses, and current financial position.
• Ease of preparation - Knowing your figures allows you to manage your cashflow better. You can spot late payments, monitor your spending and avoid dipping into an overdraft.
• Informed decisions - You can make knowledgeable choices about your business when you have access to accurate financial information.
• Comply with HMRC - Happy bookkeeping makes for smoother tax returns! Keep on top of your accounts and you’ll minimise the chances of being caught out by HMRC.
• Prepare for year-end - Great bookkeeping practices will save you time when the tax man comes knocking. You’ll also avoid punishing late submission fees.
• Grow Your Business - When your books are in order, you have the numbers you need to plan for the future and grow your business with confidence.

Do I Need a Bookkeeper for My Small Business?

Whether you run a corporate company, own a small business or are a sole trader, you can always benefit from having a bookkeeper. Some business owners like to record their own bookkeeping, but this often leads to overwhelm and mistakes. Hiring a bookkeeper will give you more time to focus on running your business and leave the numbers to the professionals.

Bookkeeping services today are like business insurance, you can pay for as much or as little coverage as you need. Whether you want occasional support or your bookkeeping fully managed, take the first step today and see the benefits for yourself.

Manual vs Digital Bookkeeping

Bookkeeping is generally done through digital bookkeeping software. Most programs offer cloud-based options which allows your bookkeeper to record transactions as they happen. Automatically updated bank feeds and accessible financial data from anywhere are just some of the benefits of digital bookkeeping. Online bookkeeping prevents human errors and allows your accountant to work seamlessly with your bookkeeper.

Conclusion

To conclude, bookkeepers are responsible for making sure your business’s financial records are correct and up to date. Bookkeeping is essential for compliance. Not only will your business be prepared for tax season, but you’ll also have a better understanding of where your money is going each month.

Now you know what bookkeeping is and what a bookkeeper does, give yourself the peace of mind knowing your books are done right.