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The Role of a Bookkeeper in Business: What Do They Do?

There are several misconceptions about what a bookkeeper does and what their role is in business. One of the most dangerous of these is that any business owner can do it on their own.

Another misconception is bookkeeping solely involves dedicated data entry work. While at the base level, this can be true, there’s more to bookkeeping than you might think.

In fact, it can be rather complex. So what we aim to do in this article is give you a quick yet comprehensive look into the world of bookkeeping.

What is Bookkeeping & What Is Its Role in Business?

The role of a bookkeeper in business somewhat parallels that of an investigator in a crime scene. What do crime scene investigators do? They collect nuggets of evidence, including “fingerprints, footprints, tire tracks, blood and other body fluids, hairs, fibers and fire debris,” the NIJ says. 

Every little detail counts to help them draw a conclusion that led to the fateful event. Morbid as this may sound, bookkeepers practically do the same — sans fingerprints and fire debris.

But what separates bookkeeping, aside from the absence of murder and disaster, is how the evidence builds up. In bookkeeping, the process of collection involves regularly “[managing] general accounting ledgers, recording journal entries (transactions), and [generating] financial statements,” a blog in QuickBooks says.

Image credits to Canva

The key words here are consistency and care, the two pillars of this accounting activity. As long as these are observed, your company’s books will be fine.

However, there are different ways in which a bookkeeper maintains their role in business. While there are myriad approaches to bookkeeping, your business needs to know only two at the start — cash basis of accounting and accrual basis of accounting

Training organization CFI distinguishes cash basis and accrual. In one of its articles, it says cash basis is a method wherein a transaction is recorded only after cash has been received or paid. On the other hand, accrual records every transaction that happens, whether or not cash has been received or paid.

However, these accounting and bookkeeping methods’ endgame is the same. The role of bookkeeping in business includes:

  • Letting you build a systematized way of determining your business’s performance
  • Helping you make data-driven decisions for your business
  • Ensuring you comply with tax laws and regulations

All of these are necessary for growing your business.

What Does a Bookkeeper Do? Their Role & Responsibilities

Now that we’re clear on the role of bookkeeping in business, it’s time to zero in on the responsibilities of a bookkeeper. What do they do, exactly? 

To put it briefly, a bookkeeper’s role in business involves recording daily transactions. In more concrete terms, they update books or the general ledger on a regular basis, our CPA says.

However, keeping tabs on transactions is not exactly as simple as one would believe. Bookkeeping specialists have to perform their functions in a highly systematic way.

For example, bookkeepers are necessary throughout the accounting cycle, from identifying transactions to making financial statements. The tasks involved here include:

  • Determining the nature and flow of transactions
  • Recording journal entries chronologically
  • Creating a trial balance
  • Reconciling accounts
  • Adjusting or correcting errors when needed

Once the accounting cycle is over, bookkeepers have to do it all over again. To a few, this endlessly looping activity can be tedious. But that’s what bookkeepers are for. So the question now is how do you find the right one for your business?

Image credits to Canva

Characteristics of a Qualified Bookkeeper

Finding a qualified bookkeeper who can perform their role in your business with finesse doesn’t have to be difficult. In fact, it can be easy as long as you connect with the right people or even an experienced company that provides finance and accounting outsourcing.

So we’re here to make it easier for you. These are the characteristics you should look out for when you’re scouting for qualified bookkeepers. 

  • Proficient in using basic bookkeeping software, such as Microsoft Excel, Xero, and QuickBooks
  • Capable of keeping a good paper trail and adhering to a solid bookkeeping system consistently
  • Knowledgeable in and applies the generally accepted accounting principles (GAAP) standards
  • Strictly compliant with tax standards and regulations
  • Detail-oriented, thorough, and accurate

With these qualifications and characteristics, you’ll have a much easier time working with bookkeeping specialists. 

How Different is the Role of a Bookkeeper from that of an Accountant?

Given the workload of bookkeepers, you might wonder whether some of the tasks we listed down actually belong to accountants. 

You’re right in thinking there are overlaps in the role of an accountant and a bookkeeper. After all, their responsibilities tend to be similar across job postings. So it begs the question of whether they perform different roles at all.

Depending on who you ask, the differences between a bookkeeper and an accountant may vary. One assumption is accounting is the umbrella term for all finance-related activities in business, and bookkeeping is one of them. This means all specialized accounting roles — from bookkeepers and auditors to tax and forensic accountants — are, at their core, accountants.

However, others might see it differently. Bookkeeping is deemed primarily to be a data-gathering process, while accounting is regarded as the analytics side of monitoring a company’s financial data.

A blog in Xero leans toward the second distinction, saying “[bookkeeping] focuses on recording and organising financial data. Accounting is the interpretation and presentation of that data to business owners and investors.” We agree with Xero.

Accounting and bookkeeping are similar as they deal with an organization’s financial data. They’re also similar in their need for analysis; however, the kind of analysis concerned differs, our CPA says. Accountants have to make high-level analyses of accounts, detailing the company’s performance and forecasting trends. On the other hand, the kind of analysis bookkeepers make deals with identifying transactions and determining whether adjustments have to made.

What do you think? How will you distinguish the role of a bookkeeper from that of an accountant?

In Summary

The role of a bookkeeper in business mainly involves recording daily transactions. Bookkeepers update books or the general ledger on a regular basis to help keep the company abreast of its sales and expenses.

If you want a more detailed look into the activities of a bookkeeper, you only have to study the accounting cycle. Some of a bookkeeper’s activities you can find there include:

  • Determining the nature and flow of transactions
  • Recording journal entries chronologically
  • Creating a trial balance
  • Reconciling accounts
  • Adjusting or correcting errors when needed

Looking for professional CPAs and accountants at lower rates? At NarraSoft, we treat your business as though it were ours. So why not partner with our accountants today to accelerate your business growth.Send us an email at sales@narrasoft.com or send us a message on our chat box or contact form.