What is Bookkeeping?

Bookkeeping is the process of recording day-to-day financial transactions. Transactions can include any purchases made, sales of goods, payments for services, receipts, and more. The name derives from the fact that such records were kept and maintained in handwritten books, although today such records are usually maintained electronically on computers. In a business context and in its basic form, bookkeeping is the recording of financial transactions.

Why Do I need it?

There are so many reasons why your business needs accurate bookkeeping, but let’s start with the business related reasons:

  • So You Don’t Make the Taxman Angry

    As a business (and an individual for that matter), filing and paying your taxes is a must. And as a business owner, you can’t file and meet your tax obligations without accurate bookkeeping. You or your business might even need to make quarterly, estimated tax payments, so your bookkeeping needs to be current, and shouldn’t wait until year-end.

  • So You Get Paid

    Without bookkeeping, you won’t know who owes you what. Basic bookkeeping means invoices sent and payments received. In the early days of a small business this can seem unnecessary because you can juggle that information in your head, but as your business grows you’ll need systems to track things like payables and receivables. And ultimately, how your business manages its cash flow directly impacts what you personally take home!

  • So You Don’t Screw Up Your Bank Account

    If you keep track of your business’ bookkeeping, it’s a simple thing to go through your monthly bank statement and make sure everything matches up. This is called bank reconciliation. Accurate bookkeeping makes reconciling your bank accounts easy and prevents banking errors from causing financial problems.

  • So You Know If You’re Making A Profit

    Ah, profit. Aside from passion, profit is probably one of the top reasons you’re an entrepreneur in the first place. But without bookkeeping it’s going to be really tough to gauge whether or not your business is actually profitable. While your bank account might be in the black at the moment, that doesn’t mean your company will show a profit at the end of the year. Keeping accurate books, on the other hand, allows you to see inflow vs. outflow. And that’s how you know whether or not your business is profitable.

  • So You Can Get Financing

    If you’re business is growing and your considering financing to help with expansion, that’s great—until you walk into the bank without any evidence whatsoever that you are actually running a successful business. Accurate bookkeeping is the foundation that generates that evidence. When you do proper bookkeeping, you can easily generate reports such as balance sheets and profit and loss statements that are critical to helping you make your case for financing. Bottom line: no bookkeeping means no loan.

Do I really need to hire a bookkeeper?

The short answer is ‘no’. You can be self-employed or even run a small business without any legal obligation to hire an accountant, let alone a bookkeeper. However, unless you are a bookkeeper or accountant, you must ask the question ‘is a productive use of your time?’ For many small business owners there are probably 101 other things that you could be doing instead; things that you’re good at, things that make money, things that will grow your business.

 

It turns out that most people don’t find accounting interesting. In fact, it’s usually the part of running a small business that owners hate the most. Despite this, many entrepreneurs begrudgingly toil over their books for hours on end, often coming out with no better understanding of their business than when they started. Does this sound like you? Have you been putting off outsourcing this work? Maybe it’s time to delegate this task to someone who actually enjoys it.

 

Here are just 3 reasons why you should consider hiring a bookkeeper:

  • You Don’t Have Time to Do it Yourself

    No matter how hard we try to extend it, a day will always contain 24 hours. There are just so many things we can accomplish each day. If you are trying to juggle sales, marketing, shipping, and bookkeeping at once, something is going to suffer. There is nothing more important to an entrepreneur (especially when they are the only employee) than effective time management. Spending 5 hours doing a bank reconciliation that would take a bookkeeper 30 minutes just doesn’t make sense. Sure, it’s an extra cost each month, but how many more sales could you have made in those 5 hours? Which scenario is really costing you more money?

  • You’re Not a Subject-Matter Expert in Bookkeeping

    I’m sure most of you wouldn’t attempt your own dentistry in order to save some money. If debits and credits are as confusing to you, you could be doing yourself more harm than good. At best, you’re not getting an accurate picture of where your business is at. At worst, you could receive notice from the IRS that include words like “audit” or “penalties”. Once again, is doing it yourself really saving you money?

  • The Process Leaves You Feeling Less Than Enthusiastic

    On a less serious note, bookkeeping is really boring (for almost everyone). I’ll bet most of you would much rather be selling, or reaching out to new clients than entering invoices or preparing income statements. I know you want to have that data available to you, but wouldn’t you rather just have it show up like a gift every month. Although business isn’t supposed to be all fun and games, filling your days with tasks you hate makes it hard to get motivated.

    I completely understand the desire to do everything yourself. I’m equally stubborn, so the idea of admitting I can’t do something, and then paying someone else to do it is a difficult struggle. At the end of the day, you need to make the most of your time, money, and expertise.

    Bookkeeping is a very important aspect of your business. It can give you a very good picture of where you’ve been, which will help you make informed decisions on where to go next. If you don’t feel like you have the time, knowledge or desire to do it yourself, Sweet Results Bookkeeping can help.

What’s the difference between a Bookkeeper and an Accountant?

If you’re considering bookkeeping services or other financial services, you may eventually see words such as “bookkeeper,” “accountant” and “CPA.” For many people, these words are used interchangeably and refer in general to financial professionals. However, there are important differences between these roles and understanding these differences can help you determine who you need to work with for the best results. If you run a business, knowing which financial professional to call can help you make the right decisions.

  • Bookkeepers perform much of the data entry roles related to finances at a company. They literally “keep” the “books” by recording the day-to-day transactions at an organization. In general, bookkeepers will have at least an associate’s degree and two or more years of experience before being considered professional bookkeepers.
  • Accountants usually have a Bachelor’s degree in business or accounting. The role of the accountant is to analyze and verify financial information. An accountant will prepare and adjust entries and accounts. The accountant will also prepare financial statements for a company and will advise a company’s managers and executives about how specific decisions could impact a business’s finances.
  • CPAs (Certified Public Accountants) need extensive training and a degree in accounting. They must also meet regulations regarding experience and ongoing education before they pass the Uniform Certified Public Accountant Examination. Every state has slightly different rules about CPAs, but in general, all require these professionals to have certification and education. CPAs offer a range of financial, tax and auditing services. Most CPAs do not perform bookkeeping services. If they do, you can bet that you are paying too much for that expertise.

 

At Sweet Results Bookkeeping, we are Accountants that offer Bookkeeping Services. We have the education and experience not only to record all of your financial transactions, but also to prepare the necessary financial statements such as the Balance Sheet, Income Statements and Cash Flows. We reconcile your balance sheet accounts and make adjusting entries if necessary, and we can analyze your financial data to help you make business decisions. We are not CPAs or EAs (enrolled tax agents), so we do not prepare Audited Financial Statements or Income Tax filings. We do, however, prepare the necessary financial reports and gather the supporting documentation for your Tax Accountant or CPA, so they can complete these tasks at year-end. We also book your CPAs adjusting entries and true up your accounting system to reflect any changes made by you CPA during their year-end audit.