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What is Bookkeeping? Understanding the Cornerstone of Financial Records and  Management

When you’re searching for accounting services, you’ll find there’s a wide range of different professions that fall under the umbrella of Accounting. Among these varied roles and responsibilities, there’s one practice that stands out as the cornerstone of financial organization and management: Bookkeeping.

Bookkeeping plays an indispensable role in both personal and business finance, yet it’s often not well understood by those outside of the accounting industry. To clear up any misconceptions and help you find the right service provider for your needs, we’ve put together this helpful guide on bookkeeping and the pivotal role it plays in financial health.

Bookkeeping Defined

Bookkeeping is the practice of recording, organizing, and maintaining financial transactions and records by accurately and methodically documenting all incoming and outgoing financial transactions (such as sales, purchases, receipts, and payments). While it’s most often used for business purposes, individuals also hire bookkeepers to help them with expense management and budgeting.

What Do Bookkeepers Do?

Now that we’ve defined bookkeeping, here’s a closer look at some of the tasks Bookkeepers may perform depending on their specialization and the needs of their clients:

  • Data entry: recording transactions and keeping the books balanced.
  • Bank reconciliation: Checking that the books match the bank statements and other financial records.
  • Monthly reporting: Creating summaries that show how an individual or business is doing financially.
  • Accounts Receivable: Creating invoices for clients to ensure they receive payment for their services.
  • Accounts Payable: Handling accurate and timely payments to suppliers.
  • Payroll: Calculating pay and deductions for employees.
  • Tax Documentation: Helping you gather and organize the information you need to file your tax returns.
  • End-of-Year Reporting: Assisting with yearly income statements (a statement that shows income and expenditures) and balance sheets (a summary of an individual’s or company’s financial balances).
  • Business Strategy: Assisting with preparing budgets and forecasts that help you make business improvements. 
  • Business Processes: Implementing software and controls to streamline operations.
  • Training: Teaching you and/or your staff about best bookkeeping practices and software.
  • Liaison: Meeting accountants on behalf of clients regarding financial and tax matters.

Having a good bookkeeping system helps businesses and individuals make smart financial choices. When records are accurate, tasks like setting a budget, planning for the future, and getting ready for tax season become much simpler.

What’s the difference between bookkeeping and accounting?

Bookkeeping and accounting may seem similar, but they are two distinct professions. You can think of bookkeeping as the preliminary steps in financial organization and management that lays the groundwork for accounting.

Accountants take the information provided by bookkeeping and transform it into meaningful insights that can be used to make financial decisions. Accounting involves analyzing, interpreting, and summarizing financial data to offer a comprehensive view of a business’s or individual’s financial health. While bookkeepers don’t need to be certified, accounting is typically performed by a certified professional. Visit our Glossary of Terms to learn more about the different types of accounting professionals and what they do. 

How to Find a Bookkeeper

If you’re ready to hand over your bookkeeping responsibilities, it can be difficult to know who to hire or where to look. Our directory is a valuable resource that helps you find qualified professionals near you who specialize in personal bookkeeping, business bookkeeping, and more. We offer robust search and filtering features that allow you to search by service, industry, software, languages spoken, and many other factors to help you find the right service provider. Start your search today to find the perfect match for your bookkeeping needs!

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