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Most communities have at least one bookkeeper who serves the local businesses. They make occasional visits to each client to update the books, prepare payroll, pay bills, and take care of whatever other tasks they’re expected to handle.

If you own a business or are preparing to open one, you might think the community bookkeeper is your only option. Not long ago that assumption would have been true but not so much anymore. In the modern internet age, it’s easier than ever to communicate and collaborate with people far away through the web. That means you can work with the best bookkeeper for you, no matter where they happen to be located.

Your local bookkeeper might do a perfectly fine job but you don’t have to settle. Advancements in technology have led to advancements in outsourced bookkeeping. Modern bookkeepers who use the latest software and other tools to serve their clients can bring major benefits to your business. Here are a few examples how:

Bookkeeping in real-time

Making an occasional visit to a client’s office is no longer a practical way for a bookkeeper to work.

Modern bookkeepers instead manage their client’s finances in real-time, using cloud accounting and bookkeeping software. They can access your general ledger from their own office and keep your books accurate and up-to-date at all times. You’ll always have insight into cashflow, helping you make smart business decisions. And your bookkeeper can identify and resolve any issues before they get worse.

A bookkeeper who understands your industry

One of the biggest downsides of traditional, local bookkeepers is they’re not always experts in the operations of the businesses they work with. They tend to take on all comers, which prevents them from developing an industry-specific specialization.

As technology has advanced, many modern bookkeepers that are able to serve clients remotely have carved out a niche for themselves. You should take advantage of this development and find a bookkeeper that is an expert in your industry. They’ll understand how your business operates, make suggestions on the best technology to implement, and let you know how you’re performing relative to similar businesses.

Better service at a lower cost

Modern bookkeepers who use cloud technology are often able to provide a wide range of services, with quick turnaround times. And they’re often able to do so at a lower cost than traditional bookkeepers.

This is because different cloud-based systems are able to connect and share data, reducing the amount of data entry that is required. For example, your point of sale system can automatically import daily sales transactions into your accounting software. Similarly, your invoicing software can update your accounting software when a customer pays an invoice. And your payroll software can automatically update your employee records for tax purposes.

The reduction in data entry means modern bookkeepers can focus on services that are more beneficial to you, like frequent bank reconciliation and financial reporting. They’re often able to charge less than bookkeepers who don’t use this technology because hours aren’t spent on tedious data entry.

Find the best partner for you

At the end of the day, the best bookkeeper for you is someone who you trust and like working with. Your local community bookkeeper might have those traits but if they don’t, you’re search doesn’t need to be constrained by geography.

The Balance Sheet is the core financial statement of any business. It’s a “snapshot” in time of your company’s health; it provides information at a specific date such as December 31, 2015. However, the Balance Sheet does not state how you used your company’s assets or how the business arrived at its current position. Instead, additional financial statements use the information on the Balance Sheet to analyze the information presented. For example, the Income Statement uses the information provided on the Balance Sheet to determine how a company used assets to generate income.

The Balance Sheet consists of the following basic categories:

  1. Assets.This category lists cash, accounts and notes receivable, inventories, short-term investments and marketable securities, prepaid expenses, and other current assets. This category also lists land, buildings, machinery, and equipment.
  1. Liabilities.Liabilities are your company’s debts. This category lists accounts payable, notes payable, income taxes currently payable, current portion of long-term debt, and other current liabilities. Additional items listed in this section of the balance sheet include long-term debt, capital lease obligations, deferred income taxes, and other long-term liabilities.
  1. Owner’s Equity.Also known as net worth, owner’s equity is the difference between your assets and your liabilities, and gives you the value of your business at a particular point in time.2

While the Balance Sheet does not show how you generated income, the Balance Sheet can help you analyze trends in your company. For example, are the receivable and payable cycles becoming longer or shorter? Are you heading toward a cash shortage? The balance sheet can also tell you if your company is in a position to expand. Banks, vendors, and investors will also look at your company’s balance sheet to determine credit and loan worthiness.

However, you can only create your balance sheet after you make the necessary adjusting journal entries, post the journal entries to the general ledger, determine period totals, and create a trial balance sheet. The Balance Sheet requires information from different sources from your accounting records and it is the source for the majority of information about your company’s current stability, worth, and profitability. In addition, it is the source for all additional financial statements about your business.

When most people think about bookkeeping and accounting, they would be hard-pressed to describe the differences between each process. In this article, the functional differences between accounting and bookkeeping are explained, as well as the differences between the roles of bookkeepers and accountants.

While bookkeeping and accounting share common goals, they each make up a different stage of the financial cycle. Read on for a look at what each process is comprised of.

The Function of Bookkeeping

Bookkeeping is the process of recording daily transactions in a consistent way and is a key component to building a strong business foundation.

Bookkeeping is comprised of:

  • Recording financial transactions
  • Posting debits and credits
  • Producing invoices
  • Maintaining and balancing subsidiaries, general ledgers, and historical accounts
  • Completing payroll

Maintaining a general ledger is one of the main components of bookkeeping. The general ledger is a basic document where a bookkeeper records the amounts from sale and expense receipts. This is referred to as posting and the more sales that are completed, the more often the ledger is posted. A ledger can be created with specialized software, a computer spreadsheet, or simply a lined sheet of paper. The complexity of a bookkeeping system often depends on the size of the business and the number of transactions that are completed daily, weekly, and monthly. All sales and purchases made by your business need to be recorded in the ledger, and certain items need supporting documents. The IRS clearly lays out which business transactions require supporting documents on their website.

Shifting Landscapes

It is interesting to note that since the advent of accounting and bookkeeping software, some components of the accounting process have been absorbed into the bookkeeping process. For instance, bookkeeping software is typically capable of building financial statements – blurring some of the traditional lines between the bookkeeping and accounting processes.

The Function of Accounting

Accounting is a high-level process that makes sense of information previously compiled, and produces financial models using that information. The process of accounting is more subjective than bookkeeping, which is largely transactional.

The process of accounting includes:

  • Preparing adjusting entries (recording expenses that have occurred but aren’t yet recorded in the bookkeeping process)
  • Preparing company financial statements
  • Analyzing costs of operations
  • Completing income tax returns
  • Aiding the business owner in understanding the impact of financial decisions

The process of accounting provides reports that bring key financial indicators together. The result is a better understanding of actual profitability, and an awareness of cash flow in the business. Accounting turns the information from the ledger into statements that reveal the bigger picture of the business, and the path the company is progressing on. Business owners will often look to accountants for help with strategic tax planning, financial forecasting, and tax filing.

The Bookkeeper Role vs. The Accountant Role

Understanding the difference between bookkeeping and accounting is empowering as a business owner, but it’s also important to understand the kinds of credentials accountants and bookkeepers have in order to determine how or when to use each. Read on for a look at what the roles of bookkeeper and accountant entail.

The Bookkeeper: Typically, bookkeepers are required to have between two and four years of experience or an associate’s degree. In order to be successful in their work, bookkeepers need to be sticklers for accuracy, and knowledgeable about key financial topics. Usually, the bookkeeper’s work is overseen by either an accountant or the small business owner whose books they are doing.

The Accountant: To qualify for the title of accountant, generally an individual must have a bachelor’s degree in accounting. For those that don’t have a specific degree in accounting, finance degrees are often considered an adequate substitute. Accountants, unlike bookkeepers, are also eligible to acquire additional professional certifications. For example, accountants with sufficient experience and education can obtain the title of Certified Public Accountant (CPA), one of the most common types of accounting designations. To become a CPA, an accountant must pass the Uniform Certified Public Accountant exam and possess experience as a professional accountant.

The Bottom Line

A successful marriage between bookkeeping and accounting will contribute to the long-term financial success of the business. Organized financial records and properly balanced finances produced by the bookkeeping and accounting processes are both key factors to this success. Some business owners learn to manage their finances on their own, while others opt to hire a professional so that they can focus on the parts of their business that they really love. Whichever option you choose, investing – whether it be time or money – into your business financials will only help your business grow.

Accounting outsourcing will help you in managing the accounting of your firm. Why does one need to outsource accounting? Read the article to find out.

Accounting outsourcing means to hire a firm or services for your business accounting rather than hiring full-time employees for that. Outsourcing some accounting portion of business is now a tradition especially for small and medium business. Hiring a full-time staff for receivable, payroll, calculation of taxes and paying salaries to them is more costly than outsourcing the section of the business or accounting and only pay for the accounting work.  The firms can spend their saved money on other important tasks like increased efficacy of the company and implement strategies to increase sale. Below are more benefits of outsourcing accounting:

  1. Reduced fraud: The chances of fraud increases in companies without CFO/controller. CFO/controller is a person who assesses and detects abnormal activity in the transactional data. Usually small business does not hire them, and the result is the fraud. Further, accounting controls are detected and prevent frauds up to 26%. After outsourcing, especially the small businesses can afford CFO/controller services can prevent loss.
  2. Reduced costs: Hiring a full-time accounting employee or part-time employees increase the cost and money spent on costly benefit packages. On the other hand, you only have to pay actual accounting fee it saves productivity and payroll costs. It is estimated that approximately 40% of the expenses can be saved per month after outsourcing the accounting.
  3. Save time for other important issues: Accounting itself is a complex and tedious process and looking after and checking for frauds etc. is another major task that needs time and energy. If you outsource your accounting, you will get enough free time for other tasks like bringing in new customers.
  4. Expert opinions: Outsourcing means that you are actually hiring experts for your business. They are well aware of all tax laws and other laws. They can accurately guide about tax information, full coverage to the accounting sections. Staffing options are also available on time when you need them. Companies to which you will outsource your firm’s accounting work will have qualified staff that can give you an expert opinion.
  5. A Professional Accounting: It is not always possible for one firm to hire many accountants and divide work among them. Accounting section deals with many issues like a tax return, cash flow, payrolls, etc. The chances of errors are always there. Outsourcing accounting means that you are hiring a decent team that double checks each other and ensure error free work.

 

Bookkeeping is a critical and challenging task. To save time and money, you can hire a bookkeeping firm, and they will handle all the bookkeeping tasks for you.

Bookkeeping is assumed to be a burdensome task for small business owners. They get nervous by the bookkeeping and also second-guess the knowledge and skills in fear of the Internal Revenue Service.  The bookkeeping is a crucial task, and you should not be intimidated or bored by the accounting. One quality of the successful business owners is that they do not view bookkeeping negatively and adopt a few procedures to stay on top of the paperwork. By this way, they manage to save time, money and a lot of stress.

Therefore, if you are looking for ways to improve the system, increase profit and reduce the expenditure of your business. Then one of the options is to hire a bookkeeping firm. We have mentioned below some of the ways in which bookkeeping firms save the time and money for you.

  1. Stay Updated on Business Spending

It is imperative for the business to stay up-to-date with business transactions and it can be very time consuming to catch up on neglected financial reports. Usually, the business owners are very busy with other aspects of managing the company that they don’t have time to do the monthly accounting, and their financial records are a mess.

So, bookkeeping firm by keeping records help the companies to stay consistent with tracking financial information regularly on a weekly or monthly basis.

  1. Tracking Business Write-Offs

Businesses need well documented expenses that fall within the category of write-offs, every year for tax preparations. As the tax time approaches every year, the bookkeeping firm can assist you to keep track of these expenses and prepare you to be ready for handing over the information to the tax preparer.

  1. Outsourcing of Payroll

The Payroll is an expense that adds up especially if you are spending the salary of an internal employee to handle the payroll processing. The bookkeeping firm helps business to save the time for other tasks by managing the outsourced payroll. Many streamlined systems are present and can be implemented to make the payroll outsourcing smooth and easy. These systems can be tailored according to the needs of your company to give you the professional service according to your requirements.

  1. Access to top systems

Outsourcing bookkeeping operations gives you access to the top systems and tools in the industry. Not every business can afford to pay for the expensive software or programs for their bookkeeping nor do they have enough time to keep up with changing laws and regulations. Bookkeeping firms purchase these tools and acquire the expertise in the knowledge of tool, so saving you the time and money. Moreover, these top tools create nightly backups and store the organized records and books for years.

  1. Scalability Option

Bookkeeping firms allows you to expand or cut back easily and quickly. If you want to grow your business or you want to cut down on the spending, you need to have a reliable team with effective plans and options to help you to achieve the goals. Bookkeeping firms providers provide the flexibility to quickly scale the business, thus saving the time and money for you.