Strong financial reporting is crucial for all organizations, but small firms in particular.
The future of a firm may be made or destroyed by messy books. By providing company owners with a real-time window into financial performance, accurate and comprehensive financial reports, on the other hand, enable organizations to thrive by enabling them to identify and address concerns before they become significant ones. Additionally, thorough financial records assist company owners in obtaining loans and deducting certain costs from their taxes.
To provide precise, thorough financial reports, good accounting is required. Expert bookkeepers go through, keep an eye on, and oversee a business’s daily financial documents, including payroll, invoices, and transactions. They are aware of how these specifics contribute to the overall picture, allowing CFOs, CPAs, and accountants to do their best job. To put it simply, sound bookkeeping is essential to sound accounting, sound tax counsel, and sound financial guidance.
A Bookkeeper’s Changing Role in the Modern World
Regretfully, the field of accounting is often misinterpreted. It is sometimes confused with data input. Bookkeepers used to do “basic data entry” chores, but this has been changing over time, particularly because most data entry positions are anticipated to become automated with the development of artificial intelligence.
Today’s bookkeepers must develop into tomorrow’s controllers. According to Investopedia, a controller takes “ownership of the financial reporting process” at businesses by managing the transaction reporting process, ensuring reporting compliance, overseeing the application of internal controls, and helping with budget preparation. Bookkeepers are rapidly becoming data architects with in-depth understanding of different kinds of data and how they interact and flow through businesses, as opposed to simply data input operators.
Knowledge of Finance for Small Enterprises
Every small firm needs a group of skilled financial experts to handle reports and keep an eye on figures. At the core of the team should be a single expert who manages software integrations like Norman, supervises all data inputs, and makes sure that monthly financial reports are correct.
Although in-house or fractional CFOs sometimes do these tasks, this expert is often a controller or bookkeeper that a company owner engages inside or contracts out. Owners of businesses sometimes decide to do their own accounting. According to a Quickbooks Live Bookkeeping poll from 2021, 34% of small company owners do their own bookkeeping. Hiring a bookkeeper isn’t always required in certain situations, most notably in very small family firms, particularly if there is someone on the team with the expertise to keep the company’s accounts up to date on a regular basis. This individual often just has two primary responsibilities: entering transactions and ensuring that the bank accounts are reconciled. They are not required to do in-depth analysis or compute financial ratios.
Generally speaking, a small business owner should think about seeking advice from a qualified bookkeeper and accountant once they’re handling more assets and liabilities, such as buying pricey equipment, managing a large inventory, or making significant investments. As a starting point, this expert should be able to regularly review the balance statements of the business and ensure that each line item corresponds to the correct amount.
Things to Consider When Choosing a Bookkeeper
When hiring a bookkeeper, business owners should look for a number of positive indicators.
They should look for someone who understands the larger picture first. Bookkeepers pay close attention to details, but they also need to know how those facts relate to the overall financial health of the organization. Without more comprehensive comprehension and analysis, details are just that—details. A company’s financial narrative is told via specifics combined with in-depth comprehension and analysis.
Asking an accounting applicant to provide instances of problems and how they handled them, such as “May you please tell me about a time when you came across unreconciled books, and explain how you resolved it?” is a good technique to check for big-picture comprehension. Pay attention to how detailed their response is. The knowledge and analytical skills required for the position are probably present in someone who can confidently go over the problem and their solution step-by-step. An ambiguous answer from the applicant suggests that they lack broad understanding.
The capacity to create and sustain a cycle of duties that they can consistently complete is another positive sign for accounting applicants. For proper financial reporting, the applicant should be able to explain which duties are part of the monthly accounting cycle, how they will be completed correctly, and what procedures they will use to identify and fix any errors.
Regarding errors, they often result from human error. You may reduce errors by working with a bookkeeper who can efficiently set up and use different automations, such as software integrations. A great bookkeeper has procedures for routinely reviewing, identifying, and fixing the unavoidable mistakes.
Lastly, company owners have to look for a bookkeeper who can communicate well. CPAs and CFOs often speak a different language than company owners, and financial statements are complex. In the end, a bookkeeper who can effectively communicate the complexities of financial statements can provide a business owner with the knowledge they require to make wise financial decisions for the company. They can also ensure that the CFO and CPA, who are essential members of the finance team, receive the reports they require for their roles.
