Bookkeeping

The finances of your business are typically recorded in books or in computer programs by an individual known as a bookkeeper. Bookkeeping is simply keeping record of all the money that is spend, earned, and saved. If you have your own personal bank account, you are a bookkeeper. You must track your income and expenses and if you record them in a register or file, you area bookkeeper.

A bookkeeper is required to keep correct, up-to-date records of all the finances of the company. Proper bookkeeping will help your company maintain a positive cash flow and will help when it is time to file your quarterly and yearly taxes. Proper bookkeeping will indicate when your cash flow is low and will help you determine when you should and should not spend money. The Federal and State tax agencies actually require that you keep proper books.

The bookkeeping industry is a growing profession. As a bookkeeper you can expect to make around $35 -$45 an hour, depending upon experience. A bookkeeping job is time consuming because every monetary amount must be recorded. A bookkeeper must keep extremely accurate records because it will help your business function and help you avoid a headache at when the taxes are due. The IRS can actually fine your business if you do not have accurate bookkeeping. Your books help you determine how much you owe in taxes. If you are ever involved in an audit, you must show proof of all your income and outgoing monetary amounts. Failure to present accurate records of your books will result in a large fine or penalty.

Larger organizations often hire a bookkeeper, but smaller businesses usually don't have the money to afford a bookkeeper. There are software programs available such as Quicken Home and Business, QuickBooks, Microsoft Money, and others that are designed to help the small business owner with their bookkeeping.

Establishing Bookkeeping

If you are just starting your business, one of the first things you will need to do is to establish your bookkeeping. Many businesses can afford to hire an accountant to set up their initial bookkeeping, but if you cannot afford to pay an accountant, here are some tips to help you establish bookkeeping at your company.

Organization and proper record keeping is a must. Start by categorizing your income and expenses. Save all your receipts and write on them what they are for and what account they came out of. Some businesses have more than one account and if you don't keep accurate books on the accounts, you can quickly wind up with a negative cash flow. The different invoices you write need to have unique sales numbers. The invoices should be set up for sales, purchases, and even receipts. Separate your sales and purchases into different files; it will be easier to track for taxes.

QuickBooks and other bookkeeping software include sections where you can note the details of each transaction. You must list the date, the amount, the customers name or suppliers name, invoice or check number, petty cash withdrawals, etc.  Petty cash can be difficult to track if you do not have an organized system. If you have a petty cash box, include a tracking sheet. For every purchase made with petty cash, you must attach a receipt to the tracking sheet and write down what the purchase was for, etc. The same theory goes for any deposits you make into the petty cash box, include the date you deposited funds and how much.

You must know your cash flow situation if you wish to stay in business. Maintaining a proper cash flow can "make or break" your company. You should consider purchasing accounting software that will allow you to keep a running total of your cash balance. Each month you need to balance your books by adding all the payments that have come in and the payments that have gone out and subtracting them from the previous month's ending balance. You should have the same number that will be reflected on the closing balance of the current month.

It is essential to maintain a positive cash flow when payroll is due. You must make sure your account is in the positive when you need to pay your employees. For most businesses, payroll is the largest expense they have each year. If you are a small business and just starting, you may only be able to afford employees who can work for a lower wage or hire one employee that is able to take on multiple jobs. For one of your first hire's, you need to hire a bookkeeper.

The role of a bookkeeper

 As we previously discusses, bookkeeping takes a lot of time and you must be able to perform numerous mathematical equations several times a day. Depending upon what type of bookkeeper you hire, you could still be in charge of larger aspects of bookkeeping. For a small business, you can expect to hire a bookkeeper who is in charge of everything. A large business will hire a bookkeeper who is part of a large accounting division and this person will have specific duties.

The responsibilities of a small business bookkeeper include: 

• Prepare and post deposits 
• Post debits and other credits to the account 
• Produce financial statements and prepare reports for other individuals 
• Verify all receipts 
• Oversee petty cash  
• Make purchases 
• Prepare and collect on invoices 
• Payroll

 Of course the responsibilities will vary for each small business. You may have your HR Department over payroll, but the bookkeeper will still be in charge of payroll since they have access to the accounts and need to maintain the account balance.

How to hire a bookkeeper

 If you would like to hire a bookkeeper to maintain you books, you need to look for the following features:

First, a good bookkeeper must have excellent communication skills. Small businesses tend to have a small staff, each individual with multiple responsibilities. A bookkeeper may be in charge of more than just the books, they could be in charge of answering the phone, greeting clients at the door, and planning office events. Since your bookkeeper may be interacting with many people, they need to have good communication skills. If your bookkeeper will be in charge of mailing past due invoices or other letters, they need to have good writing skills.

Second, your bookkeeper needs to be willing to work overtime if necessary. Most bookkeepers can work a typical 40-hour work week, but if your company is audited, the bookkeeper will be the main person in contact with the auditors. Depending upon the field your business is in, your bookkeeper may need to work weekends and holidays too.

Third, a bookkeeper needs to have education in their field. Most bookkeepers have a bachelor's degree, but some only have an associates or high school diploma with certification in bookkeeping. A bookkeeper will be working with numbers on a daily basis, so they need to have excellent mathematical skills. A bookkeeper must also have good computer literacy and be familiar with the accounting program your business is running. Experience is always a plus as is knowledge of spreadsheet software. During your interview process, search for an individual who is detail-oriented.

What you need to know before hiring a bookkeeper

 If you are hiring a bookkeeper to manage your books, you need to know about the books first. The more you know about your books, the better chance you have at finding a bookkeeper who can help your business succeed. You need to have an understanding as to where the money is spent, how it is spend, why it is spent, and how much money you have coming in. You must understand your balance sheet and your income statement before you hire a bookkeeper.

Community colleges offer courses in bookkeeping for a small investment. You can also find bookkeeping certification courses online that will train you on bookkeeping software and how to set up your ledger. The balance sheet will include all of your company's assets, liabilities, and capital. Your income statement is usually called the profit and loss statement and it will include a summary of your earnings and expenses over a time period. The income statement needs to show the revenue, expenses, and profit or loss over the course of a year or other time period (such as a quarter).

When you are interviewing bookkeepers, show them a sample from your income statement and see if they can read it. Most income statements are set up the same, but some may include additional information compared to others. You should also have them set up a cash flow statement or an income statement; this is a great way to test their skills and knowledge. A cash flow statement is one of the easiest statements to set up simply because it includes your cash coming in and cash going out.

A good bookkeeper is hard to find. If you are lucky enough to find one who is not only detail oriented but customer friendly, do everything you can to hang onto this person. You will find it is much more difficult to train a new bookkeeper, especially if you don't know much about your accounts to begin with.