No accounting degree? No problem.
Learn the basics of small-business accounting with this beginner’s guide. In this blog post, we provide a quick run down of the key elements of Bookkeeping and why getting the assistance of an Accountant is essential for your business.
What is Bookkeeping?
Before we begin, let’s lay out what bookkeeping actually is.
Essentially, bookkeeping is the process of recording and organizing a business’s financial transactions, and a bookkeeper is a person responsible for that process. Bookkeeping is the primary way business owners can figure out if their business is profitable as it allows you to identify any red flags early on from looking at your numbers. Bookkeeping also helps you identify areas of profit expansion—areas you might not have noticed without clear financial reports you can interpret easily.
In general, a bookkeeper records transactions, sends invoices, makes payments, manages accounts, and prepares financial statements. Bookkeeping and accounting are similar, but bookkeeping lays the basis for the accounting process—accounting focuses more on analyzing the data that bookkeeping merely collects.
Three reasons why you need a bookkeeper
If you're just starting out in business, you might think you don't need someone to look after the books. Perhaps you feel that it's enough to let your accountant sort out the numbers once a quarter or once a year. But there are good reasons for hiring a bookkeeper. Here are three of them:
They save you time Unless you already know a lot about bookkeeping, it's unwise to take on this work yourself. Processing receipts, expenses and payments is only part of the work. They know how to assign expenses to particular clients. They’ll take all the numbers, enter them into your accounting software, and make sense of them. A good bookkeeper knows how transactions should be treated to provide useful business reports. It's a skilled job, and your bookkeeper will do it much more efficiently than you can.
They understand your business Because they deal with the day-to-day accounts, bookkeepers have a deep insight into your company's finances. By sharing this insight with you, they can help you work out where your business should be going. They can flag any issues in time for you to do something about them. A good bookkeeper watches over your finances and helps you steer clear of trouble.
They help manage your cash flow Accountants provide a valuable service, particularly when it comes to strategic advice, annual returns, and tax issues. But they don’t usually see your accounts every day. A good bookkeeper will keep a close eye on your accounts on a regular basis. This will help keep your cash flow under control, which is vital for business growth.
Understand what you need
Hiring a bookkeeper is like hiring any other professional. First you need to understand your own requirements. Only then can you identify people who will suit the role. Here are some questions to think about:
What type of business do you run? For example, production businesses have different bookkeeping requirements to service or retail companies.
How many transactions do you make on a daily, weekly or monthly basis? This will help determine how much bookkeeping time will be required.
Which accounting software do you use? It helps if you're using online accounting software. Then your bookkeeper can share data securely with you at any time.
Do you require credit control, payroll services or debt collection services to help you get paid faster? Some bookkeeping companies can handle chasing up the money customers owe you, at a cost.
What are your key dates? Your key dates will include payroll days, tax return deadlines and scheduled meetings with your accountant. You'll want your accounts to be accurate and up to date before each of these dates. A key date also revolves around business performance reports. Ask the bookkeeper if they review reports every month to see how the business is performing. One example is a timely and accurate Profit and Loss report.
If you are considering hiring a professional bookkeeping and accounting service, it is important to bear in mind that they must be compliant with the legislative regulations of Accounting and Corporate Regulatory Authority (ACRA) under accounting authorities of Singapore.
Unlock the potential of your business with Teo & Aizaad LLP. Our team of professionals will provide you with accounting and bookkeeping services of exceptional quality and accuracy, and at affordable prices. Contact us for a free 30 minute consultation here.