What do Bookkeepers do?
You would think that what a bookkeeper did was straightforward. But bookkeeping is about organizing business chaos and creating a summary of a company’s financial life. Bookkeepers apply accounting procedures and best practices to build a financial story for a business.
A bookkeeper brings structure to a business’s financials by building detailed reports and uses these reports to gives guidance to the business owner on the health of their business.
A Bookkeeper’s Daily Task List
- Check bank statements
- Organize and classify financial transactions
- Categorize costs and revenue
- Ensure vendors and stakeholders are paid
- Be sure financial records are ready for financial reporting
What are a Bookkeeper’s DailyDuties?
A bookkeeper brings order to the flows of money going in and out of a business. These transactions may need to be investigated, recategorized, and reported to different stakeholders, governments, and banks. Here are five tasks a bookkeeper does daily.
1). Check the Bank Account
Every great plan falls apart if you’re not checking it. In this case, even the best financial plan will fall apart if you’re not checking up on your bank account. A bookkeeper checks a business’s bank account daily to ensure that that the business isn’t being charged discrepant costs. The bookkeeper makes sure that expected revenue has come in and that expected costs are being paid to avoid incurring late fees.
2). Organize and classify transactions
A bank statement gives a snapshot of a business’ transactions, but it doesn’t give a whole picture of the business. A bookkeeper fills in the details by organizing and classifying transactions into different accounting buckets.
For example, a company cannot classify a car loan payment as a cost, only the interest portion. This is important when it comes to taxes as only the interest can be deducted as a cost. The same goes for credit card payments. Many small business owners mistakenly declare credit card payments as a cost, while only the interest is a true deductible expense.
But its understandable why this is a common mistake for small businesses. On a bank statement, this is a single transaction. A bookkeeper see’s these transactions and takes the time to classify this single transaction intotwo different accounting buckets.
3). Categorize Costs and Revenue
Once transactions are properly classified, a bookkeeper can then place them in the right categories on a financial statement.
Continuing our previous example, that single car loan payment needs to be placed into multiple categories on a financial statement. The interest is a cost that is added to the income statement. The portion of the payment that lowered the car loan needs to be reflected in a change in the company’s balance sheet.
The credit card payment must also be carefully categorized. Like the car loan, the credit card interest is an expense, while the pay down of the credit card will decrease the company’s debt on the balance sheet. This paydown of the credit card cannot be claimed as an expense while the interest payment can be.
4). Ensure Vendors and Stakeholders are paid
A bookkeeper has a deep understanding of a company’s business and act as a guard for the business. Once a bookkeeper has categorized all the company’s transactions, they can spot discrepancies in the business’ money flow patterns.
The bookkeeper can advise the small business when further financial actions are required. If a cost hasn’t been paid, they can help the business ensure it gets paid. If a distribution to partners needs to occur, the bookkeeper can note this to the owner.
A disruption to the flow of money in or out of the business can have a detrimental effect on the actual business itself. If a vendor isn’t paid, they may stop providing necessary services to the small business. A distribution to partners requires cash to be paid, so being sure invoices are converted into paid revenue is vital. The bookkeeper protects the business by acting as a guard for the small business and raising the red flag when issues arise in a company’s money flows.
5). Report Company Performance
The final step that a bookkeeper does daily is make sure that a company’s financial reports are up to date. While a bookkeeper doesn’t prepare formal company reports daily, the bookkeeper stays vigilante and makes sure that their processes continue to work so that reports can be made at the end of the quarter with minimal problems. When it’s time for formal financial reports to be created, the process should be straightforward. To ensure this, the bookkeeper tracks the financial performance of the company daily and ensures everything is reported correctly. By keeping vigilante daily, the bookkeeper ensures that financial reports are ready for the company’s stakeholders. These stakeholders include the IRS for taxes, banks forcredit, and owners so they can manage the business.
Bookkeepers need to be vigilante to make sure a company’s finances are reported accurately to all stakeholders. A bank statement cannot give a company a full picture of their finances, but with the help of a bookkeeper, transactions can be properly classified and categorized. With a full picture, a bookkeeper advises the business owner of any discrepancies in the company’s finances. Once these discrepancies are cleared by management, the bookkeeper ensures that the company’s financial records are organized so that they can be reported to any stakeholder who needs to see the financial health of the company.
Check out our supporting video here: https://youtu.be/wDlb2bTo71Q