There are many businesses that require a bookkeeper, but there are also numerous types of bookkeeping services available. We will go over the basic information you should know about bookkeeping, then delve into the different types of bookkeepers you can hire. You can utilize this information to determine which bookkeeping service is the best fit for your company, regardless of the size or age of your business.
Keep in mind, this information is to inform you, not make the decision for you. You are the authority on what is best for your business!
Bookkeeping consists of keeping track and authenticating the financial data for your business. There are two types of bookkeepers:
- Bookkeepers who only collect the financial information, confirm its accuracy, and report it back to you.
- Bookkeepers who also manage financial transactions, such as sending and/or paying invoices.
Each of these tasks will need to be completed, but precisely who does them can vary in each business. Many small businesses choose to have the owner oversee the financial transactions, while having a bookkeeping service that handles the information collecting aspect.
Bookkeeping includes tasks such as validating your books by comparing the numbers to those in your bank statements and making sure everything is ready come tax time. There are also bookkeepers who manage the task of sending and paying invoices for day-to-day company transactions.
The most important thing for you to do is discuss this with your bookkeeper and decide who will be handling each of the responsibilities. Once that is done, you can rest assured that no bookkeeping duty will be overlooked.
Having a Bookkeeper vs. Having an Accountant.
An accountant and a bookkeeper both use the financial information of a business. A major characteristic of an accountant is they analyze the data in the financial documents, while a bookkeeper simply sticks to record keeping only. Accounting is regulated, while bookkeeping is not.
Your bookkeeper will look at your daily transactions and confirm the accuracy of what is logged in the records. Accuracy is the single most important criteria of effective bookkeeping. Your books need to be precise to maintain the wellness of your business. Imprecise books can lead to a host of problems including legal issues.
In most cases, a bookkeeper does not do anything with the financial information they collect beyond confirming accuracy. A bookkeeper’s job is to focus on compiling the books correctly and on time, so the decision makers in the company can use the information accordingly.
On the other hand, an accountant would be using the information instead. An accountant takes the information from a bookkeeper and makes proposals and comes up with strategies for the company. An example of this would be an accountant may formulate a budget for the company, while the bookkeeper would provide information on past spending to advise the accountant.
Another way to look at is by thinking about the accounts receivable. Your bookkeeper will only look for the information to be correct and complete. Your account would use the information to perhaps determine how long on average it takes for a customer to pay their account in full. This type of information could help a company determine their policies.
One thing to keep in mind is an accountant could in theory also do the bookkeeping, however a bookkeeper seldom has the qualifications and certifications to do accounting. So, a small business may just hire an accountant, rather than both.
Accountant or Bookkeeper, Who to Hire First.
If your budget does not allow for both an accountant and a bookkeeper, it is recommended you hire a bookkeeper first. The books for your business must be completed and accurate, it is essential. Without this data, an accountant would have no way to forecast or strategize.
One way to see the advantage of hiring a bookkeeper first is by looking at the following example. Let’s say you have spent quite a bit on overtime lately, but the previous month showed a significant drop in payroll expenses. An accountant would look at that information and assume the employees were becoming more efficient. However, a bookkeeper would look at that information and seek to confirm its accuracy. This step taken by the bookkeeper could uncover that the payroll expense was recorded in the wrong month. The bookkeeper would now correct the mistake, while the accountant very well may never have discovered it.
The amount of money it will cost for a bookkeeper can vary greatly. It all depends on how much bookkeeping you need completed and if the bookkeeper will be handling financial transactions. There are a couple of things to consider when deciding on how much you want to spend on a bookkeeper or bookkeeping service:
In-house bookkeepers are always going to be more expensive than a bookkeeping service. This is because they tend to manage more tasks such as financial transactions. If you choose a bookkeeper than is not in-house to also do financial transactions, this will also be more expensive. To put it simply, the more things you need done, the longer it will take to complete the job, meaning it will be more expensive.
Always keep in mind if you are a large corporation with complex financial dealings, you will end up having to pay more. On the other hand, if you are a small business with very straight forward financial dealings, you will perhaps pay less than average. Be aware of what your business needs are when it comes to bookkeeping, if your needs are average, you should be paying near average. Trust is crucial, if you think you are overpaying or getting a ridiculously good deal, it might be time to explore other bookkeeping service.
Bookkeeping Service Types.
There are four different types of bookkeeping services:
- Inhouse Bookkeeping.
- Bookkeeping software along with you.
- Hire a human-only bookkeeping firm.
- Use a hybrid service that is a mix of human expertise and software.
Always remember the accounting software you use also affects the type of bookkeeper you should choose.
QuickBooks is the most popular software in use for accounting and bookkeeping (we both use and recommend it). There are however other software programs out there – such as Wave and Freshbooks. These two packages are popular among small companies and startups.
It is important when hiring a bookkeeper, you first ask which software they accept. If they do not use what you have access to, it will be difficult to transfer information.
In conclusion, it is important to choose a bookkeeper who is easy to work with and accepts the tools you use for your company.