If you run a business then, no matter how big or small, sooner or later you’ll find you need to figure out just how much money you’re making.
This might be because, quite wisely you want to be informed on where your business stands financially. Or it may simply be because the government wants evidence of your books for tax purposes. Whatever the reason, sooner or later you’ll need a bookkeeper.
What Bookkeeping Is
At its heart bookkeeping is the keeping of financial records for a business. This includes all sorts of transactions including payments, receipts, sales and purchases all of which, taken together, can help to build up a picture of the health of any business.
Traditionally, bookkeeping was done manually with paper and pens and the records made were entered into a set of documents collectively called “the books” from which the practice takes its name. Nowadays of course everything is moving over to computers. However doing the books by hand is both viable for a small business and an essential skill to have for anyone intending to work seriously as a bookkeeper.
The core of bookkeeping nowadays is a method called “double entry bookkeeping” by which entries are entered twice in to corresponding accounts which reduces the likelihood of errors getting into the accounting. This is a time tested method that was first invented by a 15th Century Franciscan Friar called Luca Pacioli the principles of whom still form the golden rules of accounting today.
Proper bookkeeping allows a business to:
- Create a snapshot of their financial situation
- Protect themselves from inaccurate entries
- Locate outstanding payments and debts owed to and by the business.
- See where the companies’ major expenses are and sources of income.
- Make reasoned and sensible business decisions based on all of the above data.
Who Should Be Your Bookkeeper
Naturally, every business at some point will need someone to fill the role of bookkeeper. The question of who to use differs based on circumstance and size of the business. If you trade mostly as a single person or as part of a small company that focuses more on fewer, larger sales it may be practical to do it yourself. However the more business any company or organisation does the greater the trail of paperwork that needs to be addressed and a business owner can very quickly find themselves bogged down in the minutiae of bookkeeping, leaving them with little time to focus on growing their business.
At this point it may be considered best to bring in outside help. There are plenty of free-lance bookkeepers who can be hired to do the books for a company. Rates vary based on experience and skill, but if you are one of those business owners who prefers to leave their tax matters to the last minute, expect to pay a heavy premium to hire an expert around that time of year.
A third option is to expand the role of another employee to cover bookkeeping duties. This gives you the benefit of saving money versus hiring another person to do the job as well as having the person responsible for keeping the books present day to day which is always helpful if you have a question. There are a number of cost effective ways to get staff trained up to be Bookkeepers including several online bookkeeping courses that can get a person certified to work as a professional bookkeeper for a fraction of the price.
