Bookkeeping Guide for Business Owners and Professionals
Bookkeeping is an often ignored component of a company, mostly because many business owners lack the knowledge or willingness to deal with it. You can get by without structured and precise accounting. Until you file taxes, ask for a small company loan, or process payroll.
As organizations expand, accounting becomes an increasingly greater component of sound finances. This is work that can be easily delegated, allowing company owners to concentrate on other elements of business growth.
Whether you’re a company owner who needs to outsource accounting or a bookkeeping professional, there’s a lot to know about hiring and being recruited in the area, particularly if you’re focused on online bookkeeping services.
For Business Owners Who Need Help With Bookkeeping
According to VA FLIX , a bookkeeper is a person who supervises and records the financial transactions of a firm. They monitor financial activities and verify the accuracy and completeness of your accounts and records. A bookkeeper records and verifies the accuracy of all financial transactions that occur inside an organization.
This function entails a multitude of smaller responsibilities necessary for maintaining correct and current information. There are four primary responsibilities bookkeepers have for company owners:
- Putting credit card and other transactions into categories
- Getting bank and other financial accounts in order
- Putting together important financial statements like your balance sheet, statement of cash flows, and income statement
- Managing invoices and bill handling
In addition to these basic responsibilities, most bookkeepers do other activities. These include:
- Setting up accounting software for you
- Putting together expense reports
- Putting together your receipts and bills for taxes
- Putting together timesheets and other information that payroll needs
- Follow up on unpaid bills, payments that didn’t go through, etc.
A Quick Note on Bookkeeping vs. Accounting:
Although many accountants are also bookkeepers, the reverse is not true. Accountants are subject to license and certification requirements; bookkeepers are not. Due to this, there are some tasks that they cannot do for you. For example, a virtual bookkeeper may prepare your payroll documentation, but cannot actually process payroll. Similarly, bookkeepers may arrange your financial documents for tax season, but they cannot file your tax forms.
Hiring a Virtual Bookkeeper
It is tempting to disregard (seemingly small) tasks like accounting while a business is expanding. When business is sluggish, bookkeeping is sometimes the last thing on your mind. Unless you are an accountant, you presumably did not launch a firm to balance finances and monitor expenditures.
That is OK; your accounting must be done, but you are not required to do it yourself.
The Pros of Hiring a Bookkeeper
- You may devote your limited time and effort to revenue-generating activities rather than bookkeeping.
- Your bookkeeper is on top of balancing and maintaining a healthy cash flow.
- A professional bookkeeper can assist you in translating your financial records and documentation into simple English, allowing you to comprehend your business’s financial picture.
- When you need to raise funds, make payroll, or file taxes, your records are professional, comprehensive, and ready to go.
The Cons of Hiring a Bookkeeper
- Regardless of whether you employ a bookkeeper in-house, via an agency, or as a freelancer, there is always a fee associated with hiring a bookkeeper.
- You must be comfortable exchanging passwords, logins, and firm financial information.
Tips for Working with a Virtual Bookkeeper
There are a few measures you can take to ensure a productive and effective working relationship with a virtual bookkeeper (i.e., someone who works remotely).
- Invest time up front to choose the ideal virtual accounting solution for you and your organization.
- When in doubt, over-communicate
- Get your current papers in order and ready for submission.
- Maintain continual organization of receipts and other documents
- Gather all of the logins and passwords your virtual bookkeeper needs into a single safe sharing solution (like LastPass)
- Create a record of your chart of accounts so that your new bookkeeper understands your financial landscape.
- Establish defined communication parameters between you and your bookkeeper (this includes regular correspondence and secure sharing of financial documents)
- Invest in the resources, equipment, and software necessary to protect your financial data (email encryption, for example, or virtual fax)
For current and aspiring virtual bookkeepers
Bookkeeping-specific positions and information might be difficult to locate if you are seeking employment in the sector. Not only is accounting sometimes mistaken for bookkeeping, but there is also considerable overlap between the two disciplines.
However, there are several businesses and organizations eager to recruit virtual bookkeepers, so there is an opportunity in the industry.
To assist you in securing a portion of this work, we have outlined all the fundamentals for present and prospective virtual bookkeepers, including:
- Salary expectations and benchmarks
- Pros and cons of working for someone else
- Job options for virtual bookkeepers
- Pros and cons to starting your own bookkeeping business
- Tips and resources to get you started with your own virtual bookkeeping gig
Bookkeeping Salary Expectations and Benchmarks
Naturally, remuneration and rates may vary greatly based on experience, credentials, longevity, and other factors, and accounting positions are no exception. However, we are aware that it is important to have a baseline when evaluating (or bargaining for) an accounting position.
Let’s examine the information that is now accessible.
Typically, part-time, contract, and freelance bookkeepers are compensated on an hourly basis, depending on an agreed-upon hourly fee.
According to data conducted by ZipRecruiter, the average hourly wage for a bookkeeper in the United States is around $19/hour. This is the average hourly wage, but expert bookkeepers may earn between $35 and $40 per hour. If you possess or improve your accounting abilities, you may earn up to $75 per hour.
Typically, full-time and in-house bookkeeping positions are rewarded differently. If you’re searching for a full-time position, you may anticipate an annual salary rather than an hourly wage. While several variables determine accounting wages, ZipRecruiter reports that the average annual compensation for bookkeepers in the United States is $40,406.
The Pros and Cons of Working for Someone Else
As a virtual bookkeeper, you primarily have two choices:
- Work for another (in-house for a business or for a bookkeeping firm/agency).
- Start your own virtual accounting service
Let’s start with working for someone else—here are the biggest benefits and drawbacks to working for another company full-time or in-house.
- You need not worry about acquiring customers or work; you can just concentrate on bookkeeping.
- Your income is often more stable and predictable.
- You get access to extra employee perks and advantages (like health insurance, retirement savings, paid time off, etc.)
- You have less influence over the accounts or customers you serve, your schedule, and the manner in which you perform your duties.
- Your income may be restricted or rise slowly.
- Over time, working for the same firm (in-house) might become monotonous or dull.
Job Options for Bookkeepers
This section is for you if you conclude that the benefits exceed the disadvantages and are ready to embark on an accounting career.
According to Accounting Today, the following sectors most often use bookkeepers:
- Legal and other professional services
- Real estate
Starting Your Own Virtual Bookkeeping Business
If you are an accounting expert who does not want to work for someone else, you may establish your own virtual bookkeeping services company. It won’t provide the same peace of mind as working for someone else, but if you’re capable of handling both duties and your own business, it may be considerably more fulfilling. If you choose this path, you will be in good company. As of May 2020, IBISWorld data indicates that there are almost 300,000 accounting enterprises in the United States, employing over 713,000 individuals. These figures are a reaction to a book accounting business with a $69 billion market size.
According to IBISWorld, the following factors are driving the rising trend:
In response to improving economic circumstances, clients have increasingly outsourced back-office administrative tasks, allowing them to concentrate on core company duties. In addition, the increased complexity of payroll and benefits payments has driven firms to outsource these tasks to industry operators more often in order to assure compliance.
To put it bluntly, the complexity of the financial world increases annually, so company owners are outsourcing bookkeeping and accounting activities in droves.
Moreover, it is an excellent moment to start a bookkeeping firm.
Starting Your Own Bookkeeping Business
As with any position, there are benefits and downsides to beginning your own accounting firm.
- Uncapped earning capacity
- Possibility to expand into a multi-bookkeeper firm Freedom to pick your clients and projects flexibility to choose your own schedule and procedures
- Everything is your responsibility, from customer acquisition to marketing to accounting.
- Your salary may vary, especially at the beginning of your career.
- You must give your own advantages (like health insurance, time off, and retirement savings)
Other Considerations: Who You’ll Work With
When selecting between working for an accounting firm or venturing out on your own, it is essential to examine the kinds of people and jobs you will be interacting with. If you work for someone else, you will likely spend a great deal of time collaborating with internal coworkers, who are often managers, bookkeepers, and accountants.
But when you start your own accounting service, you spend the majority of your time dealing directly with your customers, who are often inexperienced in bookkeeping since they hired you.
Neither of these solutions is fundamentally superior to the other, but they will affect your position differently, and you may find yourself favoring one over the other. When dealing with your own clientele, for instance, you have more influence over their personalities and characteristics. However, you may spend more time teaching accounting and money to these customers than you would with other professional bookkeepers.
If you decide to create your own accounting firm, it might be beneficial to consider how you can position yourself with the business owners you serve; there is a significant possibility of becoming a valued business partner and adviser, which can increase your value to the business.
Bookkeeping Software and Apps
Whether you are conducting your own bookkeeping, managing someone else’s, or just keeping an eye on your books, there is no lack of bookkeeping and accounting software to make the process simpler. Below are our top recommendations for free bookkeeping, advanced accounting, and mobile bookkeeping.
Top Bookkeeping Tools
Intuit QuickBooks is one of the most popular accounting and bookkeeping programs available today. The software’s simplified accounting capabilities make it simple to grow from basic spending monitoring through payroll and payments.
Xero provides bookkeeping and accounting software designed specifically for small companies. You may link bank and other financial accounts to automatically record transactions using this tool. You may then classify and reconcile as necessary. Xero includes inventory management, sales tax, and multi-currency accounting, making it an ideal solution for online businesses.
FreshBooks accounting software incorporates easy spending tracking and classification, in addition to time-tracking capabilities and robust reporting. FreshBooks offers reports that are “simple enough for you to comprehend but robust enough for your accountant to like.”
Free Bookkeeping Software.
Wave provides a vast array of services, such as invoicing, linking bank accounts, classifying transactions, and more. Wave allows you to consolidate, classify, and reconcile all of your transactions with a single tool. You may add on extra capabilities (such as payroll) as needed. Their accounting tools are free indefinitely.
AND.CO is a bookkeeping and accounting software designed for freelancers and sole proprietors. Their program includes essential accounting functions such as automatic spending tracking and time monitoring. In addition, the program provides access to major financial reports (such as income statements) and income and spending data in graphical form.