LET’S GET STARTED
- 1 What exactly does a bookkeeper do?
- 2 Importance of Bookkeeping
- 3 Online bookkeeping vs. Traditional bookkeeping
- 4 What is the difference between accounting and bookkeeping?
- 5 What are the two kinds of bookkeeping?
- 6 What Type Of Bookkeeping Service Does Your Company Need?
- 7 How Much Does A Bookkeeping Service Cost?
- 8 Online Bookkeepers Are a Great Option for Small Businesses
- 9 Startups look to Punch Financial for Online Bookeeping
Many small business owners ask the straightforward question: What is bookkeeping, and what does a bookkeeper do?
Most small business owners, even those who own a startup, understand the importance of financial data. They understand the basics of a general ledger, such as debits and credits that give rise to accounts receivable and accounts payable. But bookkeeping services, in general, are often a mystery — at least in terms of their importance.
Today, there are many options for small business owners other than just hiring an outside CPA, or a full-time accountant. Sure, there are many options for purchasing and using accounting software as a cost-saving measure, but there are other alternatives as well.
One of the most effective and efficient ways to develop an accounting system that works for your small business is to hire an online bookkeeping service to handle all your financial information. Before we can dive into what a virtual bookkeeping service does and its possible benefits, we have first to understand the role of a bookkeeper.
What exactly does a bookkeeper do?
Bookkeeping is the practice of processing, storing, recording, and retrieving financial records and transactions. At its core, routine bookkeeping is quite simple. You take all financial transactions that your company processes and record them all into general journal entries.
From these entries, you can generate different reports that show your company’s financial health in several ways. This might include a balance sheet, a cash flow statement, and an income statement.
A full-blown bookkeeping system can be much more in-depth and complex than just recording daily transactions, though. Bookkeeping tasks could include handling month-end accounting to balance your books, matching up transactions with financial records you receive from your bank statements, credit cards, and other accounts.
A good bookkeeper can also help you prepare for tax season all year round. Instead of cramming all your income tax preparation into a few weeks, they can set up a bookkeeping process that will meet your immediate business needs. They will also use basic accounting principles to help you improve the status of your tax returns.
There are a number of different ways you can approach the accounting process. Having an experienced bookkeeper on your side can help you cater to the system you integrate based on your company, the nature of your business transactions, and where you would like your company to go.
Importance of Bookkeeping
Bookkeeping shouldn’t be considered a luxury for a small business; it should be viewed as its essential part. The financial management of your business is just as important as the products and services your company provides. You can’t merely record transactions and hope for the best. It would help if you created an accounting system that will continuously monitor the financial health of your business.
It’s so essential that your financial accounting process is well-planned and executed. Not only will this help you run your day-to-day business at an optimal level, but also help you maximize deductions on your tax returns when tax season comes around.
You can’t just think of the process of recording transactions. Utilizing bookkeeping software such as Quickbooks will undoubtedly help, but bookkeeping isn’t just about recording transactions and working on financial reporting.
That’s why many small business owners rely on outside bookkeepers to help them manage their finances.
Online bookkeeping vs. Traditional bookkeeping
Until recently, the only way to hire outside financial help was to seek the services of traditional bookkeeping professionals or firms. These people, who could sometimes be CPAs, would come to your office to pour over your financial records. They would help you handle either a single-entry system or have you do one of many double-entry bookkeeping systems for you.
These traditional bookkeepers would help a small business manage their finances through bookkeeping software set up on one of your company computers. If they needed to, they would take a copy of the software file back to their office to work on and then return it to your office to copy your records.
As technology has advanced, online bookkeeping emerged as a viable option for many small businesses. No longer was it necessary to hire an outside accountant to come to their office to complete all transactions.
Now, small businesses could benefit from all the tools and tricks of the bookkeeper’s trade while the bookkeeper worked remotely. This allowed small businesses to choose from a wider variety of online bookkeeping services to help them manage their day-to-day operations as well as their cash flow.
Online bookkeeping can be a more cost-effective solution for a lot of businesses. Virtual bookkeepers can do all tasks of a traditional bookkeeping service, and they can often do even more. Since they will do all their work online, it eliminates costs related to travel and time spent going to and from the office. This works in your favor as a small business owner. There are also more choices, as you don’t have to pick from only those traditional bookkeepers near your physical offices.
What is the difference between accounting and bookkeeping?
The terms accounting and bookkeeping are often used interchangeably. And while both deal with the financial management of your small business, there are major differences between the two. When you’re looking at bookkeeping vs. accounting, the one thing that separates the two is the end-goal of the process.
Bookkeeping is an objective process. It’s an administrative and transactional role responsible for handling the daily tracking of all financial transactions. This includes recording all sales, payments, receipts, and purchases. The ultimate goal of bookkeeping is to maintain records and turn these records into information that a small business can use.
Accounting, on the other hand, is a more subjective practice. There is a definite bookkeeping aspect of accounting, of course. But the real value of accountants is that they provide small business owners with insights and ideas based on the information generated from bookkeeping tasks.
A simple way of comparing the two is that bookkeeping is step one in the financial process, while accounting is step two. Bookkeeping needs to come first, and then accounting can follow. You can do bookkeeping without accounting, but you can’t do accounting without bookkeeping.
At the same time, bookkeepers don’t dive into any of the analyses that accountants will. In this vein, bookkeeping is a much more basic task than accounting for small businesses. Accountants can help with complex financial items and even tax preparation such as accrual and depreciation. Bookkeepers cannot.
What are the two kinds of bookkeeping?
There are two main types of bookkeeping systems that your small business can use. The first is called a single-entry bookkeeping system, used by small businesses with few transactions.
Single-entry bookkeeping is simple record keeping, such as recording cash receipts, cash disbursements, purchases, and sales. Any other type of accounting transaction or event is recorded in a note. This would include equipment, inventory, and capital, for example.
All of these records are kept in one system. It results in a daily summary of all cash receipts. Monthly reports for cash receipts, as well as cash disbursements, are also generated and these represent what ends up being the company’s overall revenue and expenses.
While single-entry bookkeeping systems are adequate for the smallest of businesses, they often don’t go into enough detail to meet the needs of most businesses. This is where the double-entry bookkeeping systems come into play. In fact, this is the standard bookkeeping method that most small businesses use.
This system is more complex and detailed than the single-entry system. It assumes that each financial transaction, a business has an equal (and opposite) effect in at least two accounts. In other words, a credit in one account is offset by a debit in another account. At the end of the day, the total credits must equal the total debits.
These credits and debits are balanced against each other in what’s known as either T-accounts or a general ledger.
This system of bookkeeping is more detailed and more accurate. It helps a business improve the accuracy of financial statements by improving the process of detecting errors before they become huge (and costly) mistakes.
What Type Of Bookkeeping Service Does Your Company Need?
There are many factors to consider when you’re trying to decide which type of bookkeeping service your small business needs. First and foremost, you should look at the current status of your business. Would you fit into the extremely small end of businesses that could use a single-entry bookkeeping system? Or does your business record more transactions and would then need a double-entry bookkeeping system?
Your decision on the type of bookkeeping service you need shouldn’t just be based on the current status of your financial transactions, though. You should assess where your company is going before making this decision, as the right bookkeeping service could help take your company to the next level.
For example, if your company is growing rapidly, you could benefit from going beyond just the basic financial statements to include cash flow analysis, projections, and planning. You might need to optimize your tax deductions so you can reduce your tax liability. You might need to know when would be the time to invest in your business.
Ultimately, when you’re trying to decide what type of bookkeeping service would be best for your small business, you need to think ahead rather than only in your current situation.
Ultimately, an online bookkeeping service that can provide you with an all-encompassing solution for all your accounting needs will help you maximize the growth and performance of your small business. Punch Financial can help take your business to the next level through the help of our expert team of dedicated accountants and CFOs. We go beyond just simple bookkeeping for all of our customers.
How Much Does A Bookkeeping Service Cost?
The amount you will pay for bookkeeping will vary depending on a number of factors. Your part-time online bookkeeping cost will often be less expensive than that for a traditional bookkeeper. As we mentioned before, a big reason for this is the added time commitment that is necessary for traditional bookkeepers who do much of their work with you in-person.
By contrast, the part-time bookkeeping cost is lower because of the nature of the business. The work can be done at any location, and at just about any time, which helps lower the cost for you as a small business owner.
At the same time, the quality of the online bookkeeping service doesn’t have to be compromised just because it’s not as expensive as traditional bookkeepers. If you take your time and choose the right online bookkeeping agency, you can get all of your accounting needs met at a fraction of the cost of traditional bookkeepers. This can help your business be more efficient overall, without having to outlay as much upfront cash to get the services you need.
Online Bookkeepers Are a Great Option for Small Businesses
Now that we have answered the question, “What is bookkeeping?” it should be apparent that hiring a company to handle online bookkeeping services is a smart idea. Most small business owners don’t focus enough attention on bookkeeping services and accounting in general. Frankly, they might not have enough time, energy, or know-how to do it.
In the past, business owners in this situation would be forced to hire a traditional bookkeeper who would do the work in person, at their office, and charge a substantial fee for basic services. Today, though, virtual bookkeeping agencies such as Punch Financial can do all of this and more at a fraction of the cost.
Our online bookkeeping services provide you with more than just basic bookkeeping. We have a full-service team of expert accountants that can provide you with cash flow management and forecasting, tax preparation and planning, as well as forward-thinking CFO services that help you build for the future.
Startups look to Punch Financial for Online Bookeeping
Punch Financial’s Online Bookkeeping is highly sought by startups and small businesses across the country. With over 10 years and hundreds of companies worth of experience, we have provided countless clients with a fully remote outsourced team.
Punch Financial was the preferred online bookkeeping firm for Honey, who’s founder Ryan said “Punch was the missing piece of our puzzle. The clear financial statements and CFO guidance helped us in our early stage to maximize our revenue model and accelerate our growth”.
Our reputation for accuracy, senior attention, and exceptional client service has made us one of the financial community’s most recommended online bookkeeping service firms. Contact us below and learn how we can help you transform your business.