What are the Different Bookkeeping Duties?
Ezra Cabrera | December 6, 2020
Small and large businesses have two things in common: they collect money from earnings and they spend that money on operational expenses or to pay off debts. Bookkeepers are responsible for tracking this inflow and outflow of cash to ensure that a company’s books are always balanced. This allows accountants to do their jobs, which is to analyze those books – and thus, the company’s financial health – to advise the owners and leadership through financial decision making.
In this article, we’ll delve into the duties of a bookkeeper and why it’s a crucial role to any organization’s steady growth.
Bookkeeping, by definition
Bookkeeping is the recording of all financial transactions that businesses have to deal with every single day. In essence, it is a systematized record that demonstrates whether the company is making enough money to sustain operations, pay off debts, satisfy customer demands, and prepare for expansion.
Business owners employ bookkeepers to record, store and retrieve every single financial transaction a company makes, even when the money has not yet changed hands. Beyond transactions, bookkeepers also keep tabs on a company’s assets, liabilities, and equity.
Learn more about the basics of bookkeeping using this general guide.
What is a bookkeeper?
AccountingCoach, which is an educational online resource created to help people better understand introductory accounting and bookkeeping, defines a bookkeeper as someone “employed by a small to mid-size company to process and record the large volume of transactions involving sales, purchases, payroll, collection of accounts receivable, payment of bills, and more.” These individuals prepare all financial data that are crucial for accountants to make informed decisions, and create reports that business owners use when presenting to investors and lenders.
Bookkeepers also prepare accurate financial information for tax purposes. If the person at a company who is in charge of monitoring cash flow fails to pay the right taxes on time, it could land the business in trouble.
Not all bookkeepers are hired by organizations. Some are self-employed and may offer bookkeeping services as a consultant to individuals or companies in the infancy stage that only require essential and straightforward functions.
What does a bookkeeper do?
The bookkeeper’s duties involve anything that has to do with financial records – monetary or not. Bookkeepers log where money is spent as well as where it came from using either accounting software or traditional pen-and-paper ledgers to record the transactions.
Bookkeepers need to ensure that their records are transparent so that investors, banks, and government authorities can trust that they are accurate. They make sure that all of a company’s taxes are paid accordingly and prepare the business for an audit, should one take place.
There key financial statements that bookkeepers maintain:
- Income statement, also known as the Profit and Loss statement
- Balance sheet, a general record of the business’ financial health
- Cash flow statement, which provides an overview of the inflow and outflow of cash and its equivalents
- Equity statement, which shows the share of capital and retained earnings
What a bookkeeper does every day may vary, but it will always involve some level of monitoring, fact-checking, and maintaining transparent financial records. A bookkeeper’s duties in small businesses are typically the same as their larger counterparts, except that more prominent organizations’ requirements are more complex. Frequently, large enterprises will require more than one bookkeeper to do the job to prevent any form of oversight.
For a quick reference, here’s a summary of every bookkeeper’s tasks:
- Manage accounts payable and accounts receivable
- Pay and comply with tax requirements
- Monitor debts and make sure that the company can pay on time
- Keep accurate records of sales and bank deposits
- Coordinate with the CPA for analyzing financial records
- Watch out for discrepancies and inconsistencies
- Manage and process payroll with the help of human resources
- Keep up with operational expenses
Is bookkeeping for everyone?
Bookkeeping is part of our daily lives. Keeping track of personal savings and expenses to achieve specific goals like building a house, sending a kid to college or traveling is considered bookkeeping. Doing it on a professional level aims to ensure a business’ continuous growth and give its owners a reliable measure of the company’s performance.
People who intend to make bookkeeping a profession may find it daunting to sift through vast amounts of financial data at first, but it gets less overwhelming the more you do it.
How much do bookkeepers earn?
In the U.S., bookkeepers can expect to earn between $30,000 and $60,000 annually. Compensation varies depending the employer, location, and level of experience the candidate has. For instance, larger organizations will offer higher salaries to bookkeepers because they demand much more complex bookkeeping requirements, and thus a higher level of expertise.
Bookkeepers and accountants may have the same entry-level salaries, but an accountant has a higher earning potential as they typically receive more training. It’s not uncommon for a trained accountant to start their career as a bookkeeper as a way to familiarize themselves with the record-keeping process. Bookkeepers may also make an upwards career shift to accounting, provided that they understand the basic accounting principles and gain experience in the field.
How long does it take to become a bookkeeper?
Professionals who want to become bookkeepers can receive the necessary education and training to do so in a year’s time. If you chose to get a degree in accounting or a certification dedicated to bookkeeping, that will take more time.
Here’s how one can take the path to become a bookkeeper:
1. Enroll in bookkeeping certifications or short courses
Bookkeepers can update their skills and knowledge by getting certifications or taking short courses. Learning the latest best practices in bookkeeping and accounting will help prepare them for the profession’s biggest challenges.
2. Apply for entry-level bookkeeping jobs
Nothing prepares bookkeepers for the job better than getting real work experience. Some bookkeepers start out in other professions, but then pursue entry-level bookkeeping opportunities to learn the craft and work their way up.
3. Consider getting an accounting degree
Getting a bachelor’s degree in accounting or related courses will allow a person to stay competitive in the profession. Bookkeepers who carry a degree in accounting will stand out more than applicants who do not, so it’s certainly a worthwhile investment if bookkeeping is a career you see yourself doing long-term.
Being a bookkeeper is challenging, but the hard work will pay off
Bookkeeping means being able to systematically organize financial transactions in a way that’s easy for business owners and accountants to understand. It may be a tough job for beginners to learn, but the results it brings to businesses goes a long way in protecting the company from paying penalties or even shutting down its operations.
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