Are you struggling to stay on top of your business finances? Keeping track of each transaction, receipt, bill, and invoice may be taking up precious time you could be spending on revenue-generating activities for your business, like marketing, sales, or product development.
Bookkeepers are an under-appreciated asset for startups because they take all the stress of managing track of day-to-day finances away. Even better, you'll have a well-ordered and managed system that will help when it comes time to prepare your financials for a fundraise, an acquisition, or (everyone’s favorite) tax season.
With this in mind, read on to learn all about a bookkeeper’s responsibilities and how they can benefit your startup now, and for the long run.
What is a Bookkeeper?
Bookkeepers are responsible for maintaining the records of a company’s financial activities. They use bookkeeping software to record transactions, income, and purchases or other expenses, and make sure the company’s accounts are accurate and up to date. A bookkeeper’s job may also include managing a company’s day-to-day financial functions like accounts payable and accounts receivable, and monthly bank reconciliations.
What Credentials Does a Bookkeeper Need?
Bookkeepers do not require any formal educational qualifications or certifications. However, most employers will recommend that bookkeepers have at least an associate's degree. Bookkeepers can receive certification by a few organizations, such as:
- National Association of Certified Public Bookkeepers Certification/Licensing
- American Institute of Professional Bookkeepers Certification
While bookkeepers are not required to complete a certification or licensing process, a license can assure clients that they'll receive professional bookkeeping with a strong foundation of education, ethics, and experience.
These certifications and licenses require bookkeepers to have a few years of experience; they'll complete courses and pass exams that test their knowledge.
How Are Bookkeepers Different Than Accountants?
While bookkeepers focus on data entry and completing day-to-day tasks, accountants are more focused on making sure the data is accurate, financial analysis, and reporting on the financial health of the business.
You can think of bookkeeping as the necessary first stage of accounting. Bookkeepers will carefully collect, organize, and record all the data that accountants need in order to classify, analyze, and interpret financial data. Accurate, reliable accounting isn't possible if your fundamental financial records (aka your books) are in disarray.
Unlike bookkeepers, accountants have a bachelor’s degree in accounting, and many obtain a Certified Public Accountant (CPA) license. Because of this, they are qualified to interpret your financial records and offer guidance based on this data. Accountants who have experience working with startups, specifically, will have the necessary skills to support your company as it evolves, including designing a chart of accounts that scales with your business and suggesting the right finance and accounting tools for your business model.
Explore a more detailed breakdown of the differences between accountants and bookkeepers in our article, Bookkeeper Vs. Accountant: What's The Difference?
What Are the Benefits of Working With a Bookkeeper?
There are countless benefits to your business working with a bookkeeper, even from the earliest stages. Some key benefits to startups, specifically, include:
- Avoid mistakes. With a seasoned bookkeeper taking charge of your books, you’re less likely to encounter common startup bookkeeping errors which may cost you time, money, or deals (fundraising, acquisition, or otherwise) down the road.
- Save time. By hiring a professional to take over the day-to-day bookkeeping of your business, you’ll free up your time to focus on activities that help propel your business forward.
- Increase profits. Having a solid grasp on your business finances will enable you to identify areas of opportunity to increase profit margins, or streamline operating costs.
- Stay compliant. As your business grows, maintaining financial compliance can become more challenging and time consuming. A bookkeeper will help establish and adhere to common financial compliance protocol and workflows. This is especially important if your business undergoes an audit (which is more common for startups than you may think!).
Can I Manage My Own Bookkeeping?
If you have spare time and are generally financially-savvy, it is possible for startup founders to manage their own bookkeeping the earliest days of starting the business. However, as your business grows, your finances become more complex, or bookkeeping becomes a distraction from the bigger picture of building your business, it’s time to call in a professional.
Working with an experienced bookkeeping and accounting service like Zeni means you’ll always have reliable, accurate bookkeeping, and be prepared for whatever might come your way.
What Does a Bookkeeper Do?
Now that you know the role of bookkeepers in a business, you may be wondering: What does a bookkeeper do when it comes to their daily operations. At the highest level, they'll be keeping track of every single financial transaction that your business makes and keeping meticulous records in your bookkeeping or accounting software (such as Quickbooks or Xero). This allows you to have an accurate snapshot of your finances at any time so that you can make the best financial decisions.
With an accurate picture of your finances, you'll be more empowered to create and meet achievable goals. Bookkeepers, overall, make your business management easier.
Completing Data Entry and Categorizing Transactions
Bookkeepers will track the debits and credits of each account associated with your business. They use tools such as software, spreadsheets, and more in order to accurately categorize daily transactions and keep up-to-date records. For instance, you'll be able to go back through these records and find out the last time you maintained a piece of machinery or purchased office supplies.
Manage Bill Pay and Invoicing
Bill pay and invoicing can take a considerable part of your day if you've not yet hired a bookkeeper. When it comes to invoicing, you also need to follow-up with clients as well as create payment terms in the case of late payments. Bookkeepers are able to keep track of all of this and do the work for you.
See also: 8 Advantages of Bill Pay Software for Your Startup
Reconcile Bank Accounts
Reconciling your bank accounts is one of the most important aspects of bookkeeping, and can be a long and tedious process. This means that you're comparing your financial records to your bank account in order to find any discrepancies; common discrepancies include late fees and bank interest or service charges which appear on bank statements but not in your bookkeeping software.
Bookkeepers will be able to confirm that all payments have been processed and cash has been collected and deposited. They will also confirm all documentation for the various transactions are present and, if not, hunt them down on your behalf.
Prepare Financial Statements
Financial statements are one of the most important documents in order to keep a business running smoothly. Bookkeepers are able to regularly create:
- Profit and Loss Statements (P&L), or Income Statements: A profit and loss statement (P&L) provides a summation of the revenue, cost of sales, gross margin and expenses that a company incurs during a specified period of time, usually across a month, quarter, or year.
- Balance Sheets: The balance sheet provides a snapshot of your company’s finances at a specific point in time by comparing what you own (assets) to what you owe (liabilities), and detailing the value of the shareholders’ investment (equity). Simply put, it balances money raised with money spent.
- Cash Flow Statements: A cash flow statement, or statement of cash flows, gives a summary of the amount of cash and cash equivalents that enter and leave your company during any given period of time.
As they prepare your financial reports, they'll make sure that they match with your bank account information as well as your current records. You can feel confident that the data on these statements is accurate, enabling you to make informed business decisions and confidently share updates with your investors.
Hiring a Bookkeeper for Your Startup
Now that you also know all the benefits of hiring a bookkeeper, it's important that you find an experienced one. Not only are talented bookkeepers familiar with your industry and business, but they can also act almost like another partner.
What Makes a Good Bookkeeper
You'll first want to ensure that your bookkeeper meets your baseline qualifications. For instance, even though there are no credential, license, or educational requirements for bookkeepers, you’ll want to ensure they have ample prior experience and solid references reinforcing their experience and knowledge in bookkeeping. Next, and perhaps most importantly for startups, you'll also want to ensure that they have experience with startups in your specific business vertical.
For instance, if your business is a SaaS startup and you decide to work with a bookkeeper specializing in retail, they’ll only be able to provide basic bookkeeping support rather than being a strategic, knowledgeable partner whose contributions can help grow your business.
A good bookkeeper will become a partner to you as you grow your business. They'll be able to work with you in a collaborative matter and bring up questions and concerns for the benefit of your business.
Unsure if your current bookkeeper is the best fit for your business? We’ve outlined 12 Signs of Bad Bookkeeping to help gut check your current provider and help better understand what to expect from your bookkeeper.
When is the Right Time to Hire a Bookkeeper?
You'll know that it's time to hire a bookkeeper if you're starting to feel overwhelmed by your business's finances. According to a recent study, 39% of business owners report working over 60 hours a week and 30% say the biggest challenge of being a business owner is managing business finances. You can see how shaving off time bookkeeping can help you gain more control over your business and reclaim time.
Falling behind on bookkeeping duties can cause a slew of issues for your startup; as a business leader, you’re flying blind without up-to-date financials. If you’re unable to reference an accurate financial overview of your business, you'll struggle when making important business decisions, preparing for a fundraise or acquisition, and feel the pain when it’s time to prepare your annual tax returns.
Finding the Right Bookkeeping Solution For Your Startup: Try Zeni Today
Now that we've answered the question of “What does a bookkeeper do,” we hope you have a better grasp on how your business would benefit by enlisting the services of a professional bookkeeper.
But not all bookkeeping solutions are created equal. Basic bookkeeping solutions may need to be supplemented with a lot of founder oversight or in-house admin support. That’s not the case with Zeni. Zeni helps you unlock the value of your team by taking all the finance tasks off your plate. We handle time-consuming functions like invoicing, bill payment, and receipt management with speed and accuracy, freeing up your team members to focus on key projects instead of bookkeeping paperwork.
Customers find our service 10x faster and more convenient than other bookkeeping options thanks to our AI-powered process and interactive finance dashboard. The Zeni Dashboard gives you 24/7 access to real-time data, including vital metrics like your startup’s net burn, cash on hand, operating expenses, and cash zero date. Not only do you get a granular view of where your money is going, but you can get key insights within seconds.
For example, a common query for many startups is why their expenses increased in a particular month. With most bookkeeping services, you would need to specifically request this information, wait for someone on the team to respond, and then pay for the time they spent answering your query. With Zeni, you can go directly to your dashboard and immediately access the AI-powered insights you need, at no extra charge.