Bookkeeping Benefits: Organizing the Chaos!

April 18, 2019

Bookkeeping benefits small businesses in many ways aside from organizing cash flow. Learn what bookkeeping is and is not, and why it's so important!

Bookkeeping cover

Any small business owner will tell you – managing the paperwork that comes with the day-to-day business transactions can be hairy. Upon entering a small business office, you might see stacks of paper, over-stuffed files, and random sticky notes stuck to every surface in the room.

Some business owners might say that they use an “organized chaos” method of managing the business paperwork, and they might even confess that keeping up with all the paper isn’t the easiest job in the world. Especially when their heart is in the goings on outside of the business’ office!

The reason bookkeeping can be so tricky—and why many businesses look so messy—is because the bookkeeper often takes on many duties instead of just focusing on books. This can cause paperwork to pile up, especially when the bookkeeper is pulled in another direction.

If you, as a business owner are also the bookkeeper, you may feel like you’re burning the candle at both ends. You’re probably exhausted! If this is the case, perhaps it’s time to learn more about what it means to be a bookkeeper. This will help you see the benefits of taking this task off your plate.

What Bookkeeping Is

Start-up businesses are often on the learning curve where terminology is concerned. So, bookkeeping and accounting might be used as synonyms.  Upon hearing the word “bookkeeper,” you might say to yourself, “Well, I already have an accountant. Isn’t it the same thing?”

Actually, bookkeeping should be viewed as a separate role from accounting. However, the two roles must be able to work together. 

Bookkeeping is the task of logging daily transactions into a journal in consecutive order. And by “journal,” we’re referring to the method used to track everything, in order, by date. It doesn’t have to be an actual journal!

Bookkeeping shows the ins and outs of cash and the reasons why funds were collected or spent. After recording these transactions, the bookkeeper will take each one and assign it to an account within the general ledger. A general ledger often referred to as a GL, is a company’s accounting record.

The categories of accounts on a GL include the following:

  • Assets
  • Liabilities
  • Stockholders’ equity
  • Operating revenues
  • Operating expenses

Some examples of accounts included under the above-mentioned categories on a general ledger are:

  • Sales
  • Service fees
  • Common stocks
  • Overhead (rent, utilities)
  • Wages paid
  • Cash on hand
  • Loans
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When the daily transactions are organized according to these categories and accounts, it helps the accountant decide priority levels. While everything may appear top priority, some things, like a company’s profit and tax liability are a tiny bit higher on the list!

What Bookkeeping Is Not

Contrary to popular belief, bookkeeping is not the same as accounting.  Accountants are responsible for preparing and examining financial records, and also ensuring the accuracy of those records.  Furthermore, the accountant often calculates payroll and taxes and ensures they are paid correctly and on time.

So, think about the bookkeeper’s task as the prerequisite for the accountant. If the bookkeeper does a good job, it will make the accountant’s job easier.

What Bookkeeping Should Accomplish

Bookkeeping should organize your daily transactions. Not only that, but it should also make the transitions between your daily activities and the documentation that gets passed along to the accountant smoother. The amount of work required really depends upon the complexity of the business, and the general business’ needs. 

Some businesses might have a lot of daily transactions in sales or service fees, but the company is simple. So, the bookkeeping would be simple as well. Some businesses offer benefits and PTO, so the bookkeeper would also track those for accuracy. Another part of a bookkeeper’s responsibility may be maintaining employee records and reviewing that information to help with assessing employee raises. However, this depends on the company’s structure and roles.

The complexity of the business will also determine the amount of time a bookkeeper needs to log the transactions. If the company is relatively simple, the bookkeeper can probably breeze through the entries. A complex business will require more time and attention from the bookkeeper to make sure transactions are accurately entered into each category.

What Makes a Good Bookkeeper?

As is the case with many things in life, you want to choose a bookkeeper who understands your business. For example, most women wouldn’t go to a barber shop to get their hair cut. Why? Because of the fear you’d end up with some bizarre bowl cut! While a barber may possess the ability, it’s more about the practice barbers have cutting women’s hair. If a barber doesn’t do female hairstyles often, he might not be able to do the best job for the customer’s wants.

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The same thing is true about a bookkeeper.  You’ll find that bookkeepers who manage the books of like-businesses (there are bookkeepers who only do books for hairdressers, for instance) typically know all the little quirks of the business, and are therefore able to question the appropriate things and distinguish between others.  Having a bookkeeper who truly understands your business will help eliminate errors and free up the business owner to run the business, instead of answering bookkeeping questions all day.

Another thing to consider when choosing the bookkeeper who is right for you is whether or not the person has a degree, and how much time he/she has been practicing.  While it is not necessarily a requirement for a bookkeeper to have a college degree, sometimes having a degree will give a bookkeeper more business, and therefore will improve the bookkeeper’s skills just from practice alone.

Organizing the Chaos Once and For All

Now that you understand the responsibilities of the bookkeeper hopefully, you are inspired to take this task and shift it off your plate.  Consider outsourcing!  You don’t necessarily have to hire someone to keep in-house. Many bookkeepers will come to your workplace or you can take your paperwork to them.  Truly organizing the chaos once and for all will take a huge weight off you, and will make the transitions with the accountant flow much more smoothly. 

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