What is bookkeeping?
In a restaurant, there is the dining room where we eat our meals – but behind the scenes, there is the kitchen which is whole ‘nother world. While in the dining area the ambiance might be calm, quiet, and enjoyable, in the kitchen it’s loud, stressful, and extremely fast-paced.
So too in business, there is the front facing side of the business which is where the product is made, sold, or marketed and there is the ‘kitchen’ which makes it all happen.
That is what a bookkeeper does. While the business owner makes the magic happen up front, the bookkeeper is keeping things running in the back.
A bookkeeper keeps a business running by making sure that everything behind the scenes keeps moving, for example, the bookkeeper:
- Knows employees will need to get paid on Friday and there won’t be enough in the account because the rent, the health insurance, and their biggest vendors all need to get paid this week, so she picks up the phone and calls 3 clients who are late on their invoices to get payment over the phone.
- Doesn’t just see QuickBooks as a better version of an excel spreadsheet but rather as a powerful tool that gives the business owner more insight in her business then she could’ve on her own.
- Doesn’t wait until April 13th to send the financials over to the CPA- but rather is sending the accountant financials ahead of time and letting the business know ahead of time what his estimated tax bill will look like so he can plan ahead instead of being hit with a massive tax bill with no available funds to pay it.
- Makes sure the business owner will never question where is all of our money?
- Isn’t constricted to using one type of software like QuickBooks or QuickBooks online but can adapt to whatever works best for your business whether it’s Xero, Sage, NetSuite, Zoho, or something else more custom to your business.
So how does it work?
Bookkeeping is primarily broken down into 4 components:
1. Accounts Receivables – Otherwise known as getting paid, your bookkeeper should be sending out invoices to your client for all services performed, receiving the payments when they come in, mark them down as deposited, and if necessary, call clients who are behind. Make sure you allow your clients to pay you online, it’s not expensive and overall, it will shorten your Cash cycle.
2. Accounts Payables – Paying the bills (yay). Some people who don’t have a proper accounting setup simply either pay all their bills right away depleting their cash flow, double pay vendors because they don’t remember paying. A good bookkeeper has all bills entered, when their due, and the entire history of each and every vendor so we don’t have to scramble at year end when it’s time to issue 1099’s
3. Bank Reconciliations – Your bookkeeper will, on a regular basis, go through all bank and credit card transactions, categorize them properly, and make sure that there are no duplicate transactions in QuickBooks, no checks that were cut that were never cashed, and no suspicious charges or subscriptions no longer used. Once everything is entered the bookkeeper will reconcile each account against their bank statements to make sure nothing is missed
4. Payroll – Typically done on a bi-weekly schedule, your bookkeeper reviews everyone’s time, days off, commissions, garnishments, etc. and once entered and ready for processing will send it to management for approval before processing. Once processed, the bookkeeper will pay all state and federal liabilities, file quarter end and year end reports, and get all new employees properly set up in the system.