So, you have finally launched your online business or you planning to launch, and you’re wondering do you need a bookkeeper for your online business.
Technically, you can complete all the bookkeeping tasks on your own. However, even though it’s not mandatory, hiring a bookkeeper for your online business is highly recommended.
Bookkeepers know the details of business financial tracking and can help run your business from behind the scenes.
This guide will outline exactly what a bookkeeper does and why hiring one could be important for your business.
Why Bookkeeping is Essential for Your Online Business
Bookkeepers are in charge of collecting and recording all your business expenses, bank transactions, or any other type of financial documents. Furthermore, bookkeeping tackles other valuable paperwork, like invoices, cash flow statements, loss statements, and other records.
These are some of the responsibilities a bookkeeper has:
- Tracking expenses and financial transactions
- Recording and analyzing accounts receivable and accounts payable
- Preparing and sending invoices
- Monitoring fixed and variable expenses
- Taking care of bank reconciliation
- Adjusting journal entries
- Updating financial records
- Recording and organizing your taxes
While you can do all of these jobs by yourself, it’s much wiser to leave it to a professional. Modern-day small businesses also use bookkeeping software to help with all of these bookkeeping tasks.
Bookkeeping vs. Accounting
Before we go any further, it’s essential to differentiate bookkeeping from accounting. Although these two business branches may seem identical, they actually fulfill different purposes.
While bookkeeping refers to the process of tracking financial transactions, it’s a financial accountant’s job to analyze those business expenses and make financial decisions following the bookkeeper’s findings. Additionally, bookkeepers handle daily financial tasks, while accountants have to plan the company’s expenditures in the long run.
Although both jobs are equally important for an online business, start ups usually opt for one. When the company grows and obtains sufficient funding, business owners can hire both a bookkeeper and an accountant. To keep the business thriving, they have to work together seamlessly.
Bookkeeping Methods
There are two basic bookkeeping methods: single-entry and double-entry systems.
The single-entry system is more straightforward because it only requires tracking expenses in a one-sided manner. It’s used every time you make a transaction and every time money goes in and out of your account.
Bookkeepers prefer the double-entry method, as it’s much more effective and compatible with any type of business. It’s based on the principle that there must be a corresponding entry in a different account for every accounting entry. The received cash flow is called debit, and the value you pay out is referred to as credit.
Basic Bookkeeping Tasks
Even if you aren’t a bookkeeper, there are bookkeeping tasks that you can complete by yourself. Here are some basic things you can do to manage your business’s books to keep track of all your business expenses:
- Save all your receipts. This includes any financial records such as sales and profits
- Keep and organize all of your financial papers in a ledger in a way that’s easy to access and record
- Use all your business receipts to compose financial reports. That way, you will be able to see if your business is making or losing money.
- Update your financial information when necessary and adjust your journal entries
- Prepare all your financial documents for your accountant
Documents That a Bookkeeper Needs
If you’re taking on your company’s bookkeeping duties, you’ll constantly be surrounded by piles of paperwork. However, if you keep all your files in order and update your financial records accordingly, there’s no need to worry. Here are some documents that every bookkeeper works on:
General Ledger
This is where all your business’s financial receipts are stored. It’s also where bookkeepers keep detailed financial reports of all your business transactions. It’s advantageous if your company has multiple accounts.
Invoices
These documents are a financial record that lists a transaction between a customer and a merchant. Invoicing refers to the process of drafting and sending invoices to clients.
Journal
Also known as “Books of Original Entry,” a bookkeeping journal is where the double-entry method is applied. To simplify the process of recording expenses, bookkeepers also use an additional journal for recurring business transactions.
Financial Statements
There are different types of financial statements, such as balance sheets, profit and loss statements, and cash flow statements.
FAQ
Is Bookkeeping Mandatory?
Bookkeeping is not an obligatory part of an online business, and neither is accounting. However, it’s ill-advised to run a business without at least one of these roles fulfilled. There are multiple reasons why bookkeeping should be part of any online business.
Without a bookkeeper on board, your financial records will accumulate and leave you with increasing problems. If you aren’t supplied with financial records of all your business expenses, keeping track of your cash flow account activity won’t be feasible. Also, you may fail in meeting your tax obligations.
Furthermore, this will only lead to problems with payroll, taxes, financial statements, and other vital documents. In the long run, not having this information could destroy your business.
Can a Bookkeeper Do Tax Returns?
Even though licensed tax preparers – otherwise known as IRS Enrolled Agents (EAs) – usually deal with preparing tax returns, there are tax forms that bookkeepers can prepare, too. These taxes include 1099 and W-2 tax forms.
Other tax-related jobs that bookkeepers can do include preparing payroll and sales tax returns and calculating deductions.
How Much Do Virtual Bookkeepers Charge?
There are numerous factors you should take into consideration before researching bookkeeping pricing. The size and type of your online business are some aspects that could influence how much a bookkeeper can charge for their service.
For part-time bookkeeping services (20 hours a week), the annual total of employee costs amounts to approximately $26,000.
On the other hand, using bookkeeping software is much more affordable than hiring a full-time bookkeeper. The prices can also vary, depending on the platform and the services you want. Virtual bookkeeping services can cost approximately $6,600 a year.
Recommendations
Online business owners have the option of hiring virtual bookkeeping services. There are thousands of bookkeeping and accounting platforms available. You just have to find one that suits your business. Out of all the available bookkeeping software's, these two are what we recommend:
This bookkeeping service is ideal for small online businesses. It offers outsourced bookkeeping services that will take care of all your financial tasks, and it’s free for the first 30 days.
Bench offers various bookkeeping plans that depend on the size and type of your online business. This platform can also be directly linked to your bank accounts. Some of the services they offer include balancing your monthly expenses, composing your financial reports, and preparing your taxes.
We like Bench because it offers you the option to work with real bookkeepers and not an automated program. You can try any plan you want for free, minimizing your risk, and you can cancel any time. Lastly, Bench offers quality customer support service, should you need some additional information.
FreshBooks is another great contender in our best accounting software for small businesses review. Since 2003, they’ve been serving millions of freelancers, self-employed professionals, and business owners with employees or contractors worldwide.
So, Do You Need a Bookkeeper?
Do you need a bookkeeper for your online business?” The answer is probably yes. After reading our guide about what it takes to manage your books successfully, it’s up to you to decide whether it’s easier to complete all the bookkeeping tasks by yourself, hire a full-time bookkeeper, or try your hand at using bookkeeping software. If you choose the third option, we highly recommend Bench.
What do you think is the best option for your online business to succeed? Which bookkeeping platform is your favorite? Let us know in the comments section below.
