How good are you at managing your business's finances? Do you keep a record of every transaction made? Do you meticulously store receipts? Do you stick to your budgets and keep all records neat, tidy and accessible?
If you, like many business owners, find it hard to muster up passion for old receipts and Excel spread-sheets, then you might be pleased to know that there is a whole industry of professionals out there who love accounts enough to do them for you.
Professional bookkeepers can be hired to take care of all your business's day-to-day money matters, from filing receipts, recording transactions and chasing up invoices, to reducing tax liabilities, meeting important deadlines and keeping on top of regulation changes.
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What does a bookkeeper do?
A bookkeeper's job is to keep a record of how much money is spent, earned and owed during the day-to-day life of a business. By the end of the year, a bookkeeper will be able to use the data to compile a clear, concise and accurate record of every single transaction made during that time - accounting for everything from small stationary orders to big sales. This information can then be presented to an accountant, who will use it to file the business's end of year returns. Some main bookkeeping duties include:
Keeping financial records
It's easy to let receipts and invoices pile up when you're self-employed and have a million tasks to complete. You might tell yourself you'll sort the numbers out at the end of the day - but what if at the end of the day you have to take an overseas call, or you need to work on your website, or finish off that promotion strategy? The trouble with running your own business is that there is always something to do, and it's tempting to put the finances to the side while you work on seemingly more urgent matters. After all, those receipts and invoices will still be there tomorrow.
True - those records will still be there tomorrow, but so will the new day's batch. The longer you neglect your accounts for, the messier they'll get and the more work you'll create for yourself in the long-run.
A bookkeeper will make a record of every single transaction made in a day - whether that be sale, a purchase, or an IOU. This is so that, at the end of the month, accounts can be reconciled to check that sales and purchase figures add up to the amount left in the account.
Data logged by bookkeepers includes:
- outstanding bills
- cash flow.
Chasing up unpaid invoices
A survey by Shift Business found that small businesses in the UK lose nearly £4 billion in revenue from unpaid invoices every year. Bookkeepers can handle all incoming and outgoing invoice matters and also chase up any unpaid purchase orders so sales never get left unpaid for or forgotten.
Keeping up-to-date with tax law
Tax law changes an awful lot and breaking it can be costly, so it helps to do your research to stay in-the-know when it comes to government legislation. However, if just the word 'tax' is enough to make you feel queasy, you might want to designate this task to your bookkeeper. A good bookkeeper will make it part of his or her job to stay on top of regulation changes so they know exactly when they need to change their practices to avoid penalties.
Keeping up-to-date with software updates
Being proficient with accounting software is another important part of a bookkeeper's job. A great deal of small businesses prefer to buy accounting software instead of hiring a bookkeeper; however, lack of technical skill and know-how can lead to big mistakes that end up costing more than they're worth. Bookkeepers should be proficient at using the latest software to input figures correctly and minimise the risk of making a mistake that messes up the end of year tax return.
Working with accountants
Bookkeepers work closely with accountants when that 'end of year tax return time' comes around yet again, by presenting the year's financial records in a neat and easily accessible form. Accountants use information compiled by bookkeepers to evaluate performance and advise on future business strategies.
What is the difference between accounting and bookkeeping?
The difference between accounting and bookkeeping is that bookkeepers take care of everyday finances while accountants use records for evaluations. Bookkeepers are often referred to as 'accounting clerks'. A 'clerk' is an employee who takes care of administrative duties - and that is exactly what a bookkeeper does. Their job is to compile a concise record of all financial transactions made every day, so that when an accountant is needed (to file a tax return, offer financial forecasts, valuate the business etc.), a quick and accurate picture of the business's financial position can be obtained just by looking at the bookkeeping records. Although they are different professions, bookkeeping is often part of an accountant's role.
What are the benefits of hiring a bookkeeper?
Why opt for a bookkeeper over cheaper accounting software? Entrepreneurs who want to keep start-up costs as low as possible often think they can handle bookkeeping duties by themselves. Of course, plenty of business owners do just that, but it does take a certain amount of skill, accuracy and a great deal of time to enter accounts well, even into the most sophisticated of accounting software. Here are some of the key benefits of hiring a bookkeeper:
Avoid costly mistakes
Even business owners with a passion for figures can make mistakes. Inputting figures into a spread-sheet at two in the morning after a long day of hard graft is a recipe for disaster. DIY bookkeeping may seem like the cheaper option to begin with, but any mistakes made will impact the end of year tax return, which could result in heavy HMRC penalties.
HMRC penalties are as follows:
- For a careless mistake you could be charged up to 30% of the amount you owe.
- For a deliberate mistake you could be charged up to 70% of the amount you owe.
- For a deliberate mistake you try to conceal, you could be charged up to 100% of what you owe.
Free up time
Running your own business is hard work - suddenly you find you have an infinite list of tasks to complete that, if left uncompleted, could spell the end for you. When you rely on your business to pay the bills and support your family, those pressures can feel even greater. Hiring a bookkeeper to handle your financial transactions could free up a great deal of your time and take some of the load off your own shoulders.
In the long run, hiring a professional bookkeeper could save your business money. Experience and training ensures bookkeepers understand and record data both accurately and speedily, leaving you free to worry about other things.
How often will I need a bookkeeper?
How often you need a bookkeeper will depend on how much work you have for them, which will in turn depend on how big and complex your business is. Bookkeepers can be hired on an hourly basis - you may find you only need help once or twice a week, or you might want your bookkeeper on hand all day every day. Working hours will have to be agreed between you and the bookkeeper you choose to hire.
How much will hiring a bookkeeper cost?
How much you spend hiring your bookkeeper will depend on how much work you want them to do. Most bookkeepers charge around £25-30 per hour, but rates vary greatly from individual to individual.