Bookkeepers Role in Business

When you think of a bookkeeper, what probably come first in your mind are numbers, mathematics and accounting. Typically a bookkeeper performs many accounting and even administrative tasks on a day to day basis. The accounts a bookkeeper manages maybe for small individual businesses or large corporate businesses. But when we break it down beyond generalizing what is a bookkeepers role in a business? Read on to find out.

Bookkeepers maintain financial records, which include bank and credit card account balancing and updating to make certain that all deposits and payments are reported accurately. Bookkeepers need to allocate payments which have been received by customers against the invoices for which the payments are applicable on the debtor’s ledger. Cash and cheques are then deposited at the local financial institution for the company. Statements are then usually issued at the end of the month to ensure customer records remain verbatim with the company’s records. Lastly any overdue invoices are followed up with customers for payment to ensure the company maintains a high level of liquidity.

Bookkeepers often serve as a liaison between the sections or departments of a company, interacting with department heads to ensure that payroll information is provided in a timely and accurate manner. Payroll is then executed by the bookkeeper who keeps track of employee entitlements where applicable, the right amount of tax is withheld and superannuation guarantee is calculated in accordance with Australian workplace laws. Payments are then submitted to the bank in accordance with the payroll calculations and payslips are issued to employees. Superannuation is also required to be paid either on a monthly or quarterly cycle depending upon what the employer has nominated.

Bookkeepers will often maintain the creditor’s ledger for a company in order to accurately determine what is owed by the company to suppliers at any point in time. Once an invoice is received, the bookkeeper will determine whether the invoice is legitimate by liaising with the individual responsible for purchasing the goods or services or matching the invoice against internal paperwork. If the invoice is legitimate it will then be recorded in the accounting system for payment at the determined time. Payment is then issued as required an a remittance advice is then issued to the supplier to close the invoice or account.

Bookkeepers ensure that inventory levels in the accounting software reflect the amount of inventory which the company possesses by liaising with the warehouse to stay on top of anomalies and errors. Often inventory adjustments will be required due to dispatching errors, receipting errors and breakage. This is important as the purchasing officer needs be aware of current stock levels in order to reorder in the right amount of time to receive the goods for sale and the sales department also need to know how much stock is on hand in order to facilitate sales.

Bookkeepers are often responsible for calculating and managing the GST, Fuel Tax Credits, Wine Equalisation Tax, Fringe Benefits Tax, Payroll Tax, Pay As You Go Withholding Tax and Business Income Tax Instalments where these taxes are applicable. This is vitally important for the business as miscalculations can involve under or overpayments of the relevant taxes and incur interest and other penalties from the taxation office.

At a higher level bookkeepers are responsible for the collation and preparation of financial statements for their superiors in order to keep a handle on the financial matters of the business. This typically involves the following reports:

–          Ageing Debtors Report

–          Ageing Creditors Report

–          Profit & Loss Statement

–          Balance Sheet

–          Cash Flow Statement and Or Projection

–          Budget

These reports are vital to ensure the longevity of the business and increase in performance capability in an ever increasingly competitive marketplace.

Bookkeepers are the financial backbone of a company and as such it is important that you engage a knowledgeable and experienced bookkeeper for the industry you are in. This will ensure that you pay the minimum you need to in taxes but also remain compliant from the taxation offices point of view. Employees are paid properly but not overpaid and entitlements are calculated correctly. All money is received from invoices which are issued. Suppliers are not overpaid but also paid in a timely manner to ensure supply. Inventory levels are tracked correctly to help reduce internal theft and fast supply to customers.

What To Look For When Applying For A Business Loan

Applying for a business loan and receiving final approval can be a lengthy process, but it can make a substantial difference between keeping your own business operating and shutting it down which certainly makes the whole process worthwhile. The exact time for approval can vary depending on the type of business loan you are applying for, its complexity, and the timeliness of the borrower providing the information. The amount of a loan may also differ depending on the needs, profitability, and credit history of the business. The good news is the fact that most of the loan providers require the same information and documents from business loan applicants. Below are the usual documents and prerequisites for a business loan application.

Form for Loan Application

Keep in mind that the application forms vary from lending institution to lending institution. However, lenders typically ask for the same information in your application. So you have to prepare for questions such as – what is the purpose of your application and where you intend to use the proceeds of your loan when received. Other questions may focus upon the assets the business possesses, credit history with preferred suppliers, existing business debts, the key members of the business’s management team, and the directors personal background. These questions need to be considered first before filling out the application form.

Resumes as Evidence

Some lenders may require supporting evidence to secure claims in a director’s resume that proves their experience in business management and the industry. This is crucial for business loans that are to be used for start up businesses.

Solid Business Plan

Submission of your business plan together with your application form is imperative in all types of loan applications. Your plan should cover your projected financial statements for specifics like cash flow, profit and loss, and balance sheet. Lenders will generally inquire into a director’s credit report, which can be a key determinant in the lenders issuance of a loan. It is advisable to ensure your credit report is clear of any red crosses before starting the application process.

Income Tax Returns

All lenders will request to see at least the last financial year’s tax return for the business as well as the director’s personal income tax returns. The lender will also likely ask to see a copy of the Australian Taxation Offices balances for the integrated client account as well as the income tax account for the business and possibly the director’s where applicable. This will help determine the applicants ability to service the repayments of the loan.

Financial Statements

Lenders may require directors owning a percentage of a business to provide personal financial statements pertaining to themselves. Statements will most likely be expected to include an income statement, bank statements, cash flow projection, and balance sheet that cover the period of a year

Accounts Payable and Accounts Receivable

Another general requirement of a business loan application will be the aged debtors and creditors of the business at the most up to date point in time possible. This is to understand the breakdown of your creditors and debtors which may determine further risks of the loan.

Collateral Guarantee

Collateral is always one of the primary concerns of lenders. Substantial collateral is a requirement for loans that involve higher default risk factors. It is not often that you will not be asked to provide collateral but if the business has strong financial statements, substantial assets and a current relationship with the lender this may not be required. However, whenever applying for a loan you should be prepared to offer some form of collateral as this is the rule more often than not.

Legal Documents

Lenders may also require you to submit pertinent documents like articles of incorporation, copies of contracts with third parties, and franchise agreements. An applicant needs to be prepared to be totally transparent in their business dealings as questions can sometimes be considered intrusive.

These requirements from possible lenders will serve as guidelines in order for an applicant to consider before beginning the loan application process.

A Bookkeepers Responsibility To Their Clients

Every Company requires a bookkeeper to properly function but the duties and responsibilities vested in a bookkeeper can vary from company to company depending on the size of the enterprise and the manner as to the distribution of duties among its employees. However, notwithstanding the type of company, bookkeepers deal with at least the mandatory facets of the financial record-keeping of a firm. Bookkeepers are part of a company’s accounting department or in smaller companies are wholly and solely the accounting department, who engage in the day to day execution of financial transactions and record keeping. Bookkeepers are even sometimes regarded by business and financial institutions as the backbone of an organization.

Among the typical tasks a bookkeeper would execute on a day to day basis are the management of payable and receivable accounts, update of profit-and-loss statements, balance sheet and trial balance, establishment of BAS and PAYG liabilities, reconciliation of bank statements, and recording of financial transactions. Bookkeepers are also often responsible for the recording and calculation of the payroll function and often are responsible for the process of transferring the funds to the employees.

Bookkeepers are generally the individuals responsible for coordinating and constructing a Company’s profit and loss statement over any given time frame. They therefore have to ensure that every account in the Chart of Accounts stays in balance on at least a monthly basis and properly investigate any financial transactions within the company that are not routine or appear out of the ordinary. By doing this a bookkeeper is able to be a balance and check for staff members and privileged stakeholders who may be out to defraud or embezzle funds or liquid assets of a company.

In executing the tasks above it is a bookkeepers responsibility and professional obligation to represent their company or employer by conducting themselves with a high standard of honesty and integrity when dealing on behalf of a company. A high level of confidentiality and discretion are required when dealing with the financial matters of a company as many issues that a bookkeeper may deal with are of a sensitive nature. But beyond this it is highly likely a bookkeeper will also be exposed to sensitive details of individuals within the company including staff and even the shareholders of a company and for this reason it is important that the individual entrusted with these privileges must be trusted to manage this information appropriately.

Bookkeepers are often called upon to provide expert opinions in regards to internal operations from a financial perspective primarily because they have the best understanding of the financial day to day operations of a company. A bookkeeper will often deal directly with the directors or shareholders of the company whilst the company is going through a contracted or expansive business phase as directors and shareholders need to keep their finger on the pulse at a greater level than usual as this is generally a more volatile time for the company.

Finally, it is important that a high level of communication between the bookkeeper and management exists as this fosters an environment for business success. At all times the bookkeeper is responsible to look out for the best interests of the business and not their direct manager as a managers view can sometimes become clouded by the opportunity of personal gain which presents itself when a high level of autonomy and resource is left at a managers disposal. For this reason it is important that a Bookkeeper has access to the directors or shareholders of a company.

Outsource Bookkeeping to a Bookkeeper

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In today’s world, continual cost cutting and innovation businesses are trying to determine how they can successfully reduce overheads, increase profits and deliver a better product or service than last year to stay ahead of the competition.  One way businesses are achieving this successfully is through the principle of outsourcing.

Outsourcing has penetrated nearly every major identifiable business department in the western world whether it be sales, customer service, advertising, production and even bookkeeping, accounting and financial management. This trend in itself proves that the expertise is there so why not seek it out and take advantage of it? Well, the reason that businesses often do not consider this as an option is management do not want to risk compromising the products or services that they deliver to customers.

If outsourcing can be achieved successfully at a basic level without compromising the quality of a business’s products or services can this be done across all business units? Time has proven that outsourcing can be achieved with a level of success as everyone will have experienced the product of outsourced sales or customer service when engaging multi national and international companies. But What if a business considered outsourcing the bookkeeping and accounting functions in its operations? Could a business unit that is so critical to everyday operations and carries a high level of information sensitivity be successfully outsourced?

When somebody thinks of the term “outsource” they generally think overseas but this is not always necessary to achieve the results that are sought after. This is true especially if someone were looking to outsource a business function which requires a greater level of knowledge and expertise of national law and customs they would feel more comfortable outsourcing domestically to a business which specializes in that particular need. In today’s marketplace in Australia the domestic market is very competitive in the industry for the outsource bookkeeping and accounting services.

Today, if a business requires personnel to execute bookkeeping or accounting functions that business would typically first look to employ somebody internally to fulfill this need. However there are a number of factors that should be considered if a business is seriously evaluating whether to hire internally or engage an external accounting or bookkeeping firm to fulfill the immediate and foreseeable financial needs of the business.

Overheads are one of the greatest considerations of taking on extra staff. Beyond what the basic wage and entitlements are of employing somebody you also need to consider other employment costs. Other employment costs which a business takes on generally with a new employee are the recruitment and training costs, staff amenities (tea and coffee etc.), additional office space, cleaning costs for the additional office space. The list could continue on but these are some of the main costs incurred when taking on new staff. But what if a business could engage someone to take care of the businesses bookkeeping and accounting requirements without having to introduce any of the overheads?

Engaging an external domestic bookkeeping or accounting firm could be a game changer for many small and medium sized businesses. Having a professional bookkeeper or accountant that can pick up the workload of a business without introducing the overheads listed above is probably something that many businesses have not even considered and have just come to expect holistic employee costs a bi-product of doing business. This does not need to be the case though as we will now explore the advantages of outsourcing the bookkeeping and accounting functions of a business.

The advantages of engaging an external or public bookkeeper or accountant for the financial requirements of a business are as follows. A public accountant or bookkeeper must keep up professional development requirements in order to maintain their registration with the tax Practitioners Board. Both accountants and bookkeepers are required to have specific qualifications in order to practice in the industry this ensures that the service which is delivered is generally of a high standard. In comparison to this internal bookkeepers or accountants require neither in order to execute their job function.

Further advantages of engaging a public bookkeeper or accountant are the reduction of overheads which include all costs which would be incurred in employing a staff member (see paragraph 6). In some cases it may also negate the requirement of having a physical office where over the counter service is not required. Also the requirement of having to manage bookkeeping or accounting staff can also be bypassed, where a strict criteria of deliverables exist and are communicated to the bookkeeper or accountant effectively.

Baring in mind the advantages of engaging an external/public accountant or bookkeeper a business manager should strongly consider their options when confronted with the opportunity to make this decision.

If you are considering outsourcing your bookkeeping follow the link to find out more information.

Bookkeepers Rates and Charges

One of the first considerations when a business manager decides to engage a bookkeeper is the cost burden the business will have to bare. Cost in most cases is the primary determining factor which determines the caliber of bookkeeper that a business will engage. Cost will always be connected to the workload variable which is influenced by the size of the business, the number of transactions the business engages in and the information that a business manager desires.

Where a large workload exists a bookkeeper may be required to manage the workload and provide input on a daily basis to ensure the business operates at the level dictated by management. Where the workload is at a smaller level a bookkeepers input may only be required on a weekly, fortnightly, or monthly basis and in some cases even quarterly. Generally bookkeeping services are charged out on an hourly basis however, bookkeepers are starting to move towards a fixed fee scenario because this is more appealing for a business manager as it provides certainty and can easily be budgeted for.  There are a number of elements which need to be considered which could affect the cost of a bookkeeping service for a business, these may or may not be relevant to each business but will have a bearing on cost, these are as follows:

Find the Base Rate

Business managers now within the current economic climate are often looking for a quality and cost-effective accounting service. The downward pressure this has on bookkeeping service providers ensures that a business will easily be able to locate a bookkeeper at a cost which reflects the bookkeepers rates that had been budgeted for by management. But the cheapest is not always the best so a business must be careful which bookkeeping firm they engage to fulfill their service requirements as this can have dire financial implications for a business if the bookkeeping is not done properly.

Get to Know the Business

In order for a business manager to understand the amount of time which would is likely be involved in  managing and executing the bookkeeping tasks they must look at a few general aspects of the business and consider the following:

Does the business currently use accounting software to manage the bookkeeping functions?

–          If so, how effective is the current software at executing tasks in a time efficient manner and which also produces the features that a business requires?

–          How many invoices does the business send out per day/week/month?

–          How do customers pay for their goods/services? Is this a very manual process and can it be streamlined?

–          How are the suppliers managed and paid? Is there a better way to manage this?

–          What other time consuming tasks exist which require a high level of manual input in order to execute?

The Three Month Review Policy

A business manager should take the time to review with the bookkeeper the time it takes to execute the tasks required to fulfill the expectations of the manager. This approach will enable the bookkeeper and the business manager to discuss a new price equilibrium which is fair for both parties after the bookkeeper has experienced role and what is required of the role. There may be a large + or – time variance compared to what was initially thought which may provoke a discussion regarding internal process improvement. A process improvement discussion may result in the form of new software being implemented which may be able to automate processes currently done manually or the removal/addition of processes which could add value to the business.

Further Notes To Consider

Bookkeeping is no longer what it used to be due to the introduction of new legislation which governs the provision of bookkeeping or Business Activity Statement services (BAS) and is enforced by the Tax Practitioners Board. This in turn has led to the standard of bookkeepers greatly increasing over the past 3 years as a number of rogue operators have been removed from the industry. This has been a catalyst for a number of positive and negative aspects for a business manager wanting to outsource the business’s bookkeeping requirements. A positive aspect is there is now a minimum standard of learning and qualification which is required for a bookkeeper to be eligible for registration with the Tax Practitioners Board so to provide BAS services. This ensures a business manager that if they engage the services of a BAS agent then they are generally assured of a quality service. However with this has come an increased cost to bookkeepers attaining this level of qualification and certification which will manifest in slightly higher fees for businesses than prior to the new legislation being introduced. Ensure when you engage a bookkeeper that they are a registered BAS agent to protect the financial health of your business as a bookkeepers work will generally have powerful tax implications for a business.