In simple terms bookkeeping is the recording of financial transactions. These transactions usually include sales, purchases, and payments made by a person or an organization. It is often misunderstood that bookkeeping and accounting are the same. Bookkeeping is done by a bookkeeper, not an accountant, although many accounting offices offer these services. While bookkeeping is often necessary for good accounting it is just a small aspect of what an accountant can do for you.
How Can Effective Bookkeeping Help Me?
Whether done by yourself or by hired help having a dependable and knowledgeable bookkeeper on your side can help provide the basis toward knowing what your financial situation is at any given time.
Having someone compile your yearly income and monthly expenses into one place can make the difficulties of preparing personal income taxes that much easier. This is usually done by recording all of the transactions from your personal bank accounts, credit cards, and loans. With all of your income listed in one place you will never have to question if a federally reported form that you receive (such as a W-2 1099-Misc) is accurate or not. Plus all of your tax deductible expenses will be clearly laid out in one place so that it is easy for your accountant to use.
Any smart business owner knows the best way to gauge how their company is performing is to take a look at the books. Not having a capable bookkeeper can be detrimental to a business in the long run. Too often we see companies over draw on their operating bank accounts and incur unnecessary bank fees because the owner was unaware of how much money the company actually had at hand. Checking your balance online with the bank isn’t often enough for a business as the bank has no idea as to how many written checks you currently have outstanding. Solid bookkeeping provides business owners and operators with up to date financial information that is necessary for their business to operate efficiently.
What Should I Do?
First make sure you have the right tools.
With the help of computers bookkeeping has become a much less tedious and more streamlined process. For smaller jobs many people feel that Microsoft Excel provides all the tools necessary for effective bookkeeping. For larger jobs we recommend using a program dedicated to bookkeeping such as Quickbooks. These programs help with data entry and with the creation of organized reports.
Second, determine whether or not having someone other than you handle the books is a good idea. If you feel that these services are too expensive or that you don’t like others having knowledge of your financial situation there are many classes and books that discuss the basics of this topic so that you can learn how to become an efficient bookkeeper yourself.
Now we know that not everyone needs to have their entire personal lives tracked in QuickBooks; however if you are one of those people who always seems to be in trouble with the IRS or continually overdraws their bank account than this might be a good idea for you. On the professional side we cannot emphasize enough how essential it is to have someone with skill in your back office handling your books.