What Is a Bookkeeper? A Simple Guide for Small Business Owners

When you hear bookkeeper, you may imagine any number of roles, from data entry clerk to financial manager. The reality is, bookkeepers can bring a wide range of experience and skills to the job. While all bookkeepers offer a core service, many add a variety of complementary services as well, making the role seem a bit unclear. 

At its core, the role of a bookkeeper is to organize and maintain a business’s financial data by recording and categorizing all of its financial transactions. This helps to keep the records accurate and organized, both to support regulatory requirements such as tax compliance and financial reporting, and to make financial data accessible and legible to business owners and operators.

In this post we’ll break down what keeping the books actually involves, what bookkeepers do day-to-day, and how the right bookkeeper can help you run (and grow) your business with more clarity and confidence.

What do we mean by keeping the books?

The books were once physical ledgers, where every transaction was recorded by hand. Today, the books are kept digitally, but the purpose and process are largely the same: financial transactions are recorded and categorized in an organized, consistent manner. 

The results from the ledger feed into financial reports, which support tax return preparation, formal financial reporting, and business decision-making.

The way that the books are kept is designed to minimize errors. Bookkeepers typically use double-entry bookkeeping, a system that requires at least two entries for every transaction: a debit, and a credit. For example, you wouldn’t be able to report cash leaving the bank account (a credit to cash) without another entry to record where the cash went (a debit to an expense, for instance). 

Bookkeepers can record transactions on either a cash basis (entries recorded when money moves), or an accrual basis (when income is earned or a good or service is received), and will work with you to help decide which is most relevant for your business.

Your books could be as simple as an Excel spreadsheet, or they could be housed in software such as Xero, Sage, or QuickBooks, which I use in my practice. 

Further reading: Do I Really Need Accounting Software? Excel vs Accounting Software for Small Businesses

What are the core responsibilities of a bookkeeper?

Of course, bookkeeping is a bit more involved than entering the details of financial transactions, but it’s a fine place to start. Here are five basic functions that bookkeepers takes care of:

1. Recording daily transactions

Bookkeepers enter all transactions into the books, whether that transaction was in cash, on credit, or in-kind. They also categorize transactions by type, using subcategories of the major components of the financial statements:

• Assets

• Liabilities

• Equity

• Income

• Cost of goods sold

• Expenses

Accuracy and consistency are key to keeping a clean set of books. Typically, your bookkeeper will work with you to understand the nature of each transaction, ensuring that transactions are reflected correctly and meaningfully in the books. 

2. Reconciling account balances

This is a crucial check that bookkeepers perform to ensure your books are accurate. Reconciling account balances involves checking that the balances in your books (such as cash and credit) agree to the actual balances on your statements. 

Often they don’t match exactly — this is usually because of outstanding checks or other timing differences between when a transaction was initiated and when the financial institution captured it on your statements. A reconciliation explains the difference with precision.

The process of reconciliation can also help bookkeepers catch errors or flag suspicious activity in your accounts. 

3. Tracking accounts payable and accounts receivable

This is an important function that can help you manage your business’s cash flow. Often at month-end, you’ll have:

• Vendor invoices for goods or services received, which the business hasn’t paid yet.

• Customer invoices issued for goods or services provided, which the customer hasn’t paid yet.

Your bookkeeper may produce aged accounts payable and accounts receivable listings, which help you track long-outstanding invoices (whether unpaid to your vendor, or unreceived from your customer). 

4. Producing internal financial reports

In order to keep tabs on your business’s financial operations and performance, a bookkeeper can produce internal financial reports, such as a balance sheet, statement of profit and loss, and statement of cash flows. These internal reports are intended to help you get an overview of the business’s financial performance over the last period. 

Internal financial reporting can help you catch possible errors, identify trends, and evaluate the financial health of the business. They also provide key financial information that you may need to support your business decision-making, so it’s important that the books are kept up-to-date.

5. Supporting you in understanding the numbers

With their detailed knowledge of your books, a bookkeeper can help to translate the numbers into meaningful insights to support you by looking at your daily business activity through a financial lens.

Walking through the financial reports together is one way that your bookkeeper can support you. Your bookkeeper can also answer any questions that you have on your financial results by compiling data that may give you further insight into your day-to-day operations. For example, they can help you identify which transactions may have contributed to an expense increase this month. 

For more on working with a bookkeeper, you might enjoy:

• How to Work With a Bookkeeper: Supporting Your Business and Streamlining Your Financial Systems

• 6 Questions to Ask Your Bookkeeper to Build Financial Confidence and Clarity

• Pro Tips: Making the Most of Your Partnership With Your Bookkeeper

Are bookkeepers accountants?

Accounting and bookkeeping are two different functions. Some accountants also do bookkeeping, which can be a source of confusion; but typically, different professionals handle the accounting and bookkeeping. 

Bookkeepers focus on recording and maintaining the financial data from your daily business operations.

Accountants take that data, and:

• Interpret or analyze it

• Compile, review, or audit it

• Produce professional reports under the relevant accountant standards

• Prepare and file tax returns

Accountants and bookkeepers work together frequently, as accountants need to understand what’s in the books so that they can present the data in accordance with the applicable taxation rules or professional frameworks. 

We expand on the difference between the two functions in the post: What’s the Difference Between a Bookkeeper and an Accountant (and Which Do I Need?)

How a bookkeeper can support your business

Working with a bookkeeper can support your business both directly and indirectly.

Direct benefits of working with a bookkeeper 

Having reliable, up-to-date financial information readily available is a significant benefit of working with a bookkeeper. This means that you’ll always have access to the information you need to monitor your business’s cash flow, financial health, and profitability when you need it.

Additionally, having clean, organized books makes tax preparation and any potential audit smoother. This means less hunting for documents, minimal time spent sorting through accounting entries, and fewer tax season surprises. A cleaner set of books can also reduce your accountant’s preparation time, which could lower your year-end fees.

Indirect benefits of working with a bookkeeper

If you were previously managing your books yourself, working with a bookkeeper can free up hours of your time per week so that you can focus on running your business. You’ll also benefit from less stress during year-end financial reporting and tax season, meaning less disruption to your regular business operations. 

Having a second set of eyes on the books, and knowing that your financial data is managed, organized, and accurately reported gives you peace of mind and frees your focus to do what you do best. Your bookkeeper can also act as a resource — someone who can walk through the numbers with you when you need the extra support.

When should a small business hire a bookkeeper?

You know your business, your bandwidth, and your skill set best. Truthfully, it’s never too early — you can start out with a bookkeeper from the beginning, especially if you’re not comfortable keeping the books yourself. 

But many small business owners choose to prepare their own bookkeeping until they start noticing these signs that it’s time to hire a bookkeeper:

• Preparing the books is taking too much time away from your business, leaving you feeling stretched.

• You’re concerned about the accuracy of your books.

• You need timely financial information to make business decisions, but you don’t have time to update your books frequently.

• Your payroll, taxes, or financial transactions start to become more complex.

• You feel you need more day-to-day financial insight or support.

• Monthly revenues have grown to the point that a bookkeeping error becomes more costly.

In some cases, you may need to find a bookkeeper that can handle your specific needs; for example, some bookkeepers also offer payroll services, or are also accountants and can prepare and file tax returns, but these are not standard services that every bookkeeper will offer. 

A bookkeeper is your partner in financial clarity

Bookkeeping is an essential function for any business. They manage the day-to-day financial details that keep your records accurate, organized, and reliable.

In addition to the core bookkeeping responsibilities, your bookkeeper can support you by providing timely financial information and internal reports that help you make informed decisions and keep your business running smoothly. 

Are you exploring the idea of bringing a bookkeeper onto your team? We would be happy to discuss how Robles Bookkeeping can support your business. We offer bookkeeping and payroll services, tailored to your business and built to grow with you. Let's start a discussion with a free evaluation of your books, and see how we can help!