Bookkeeper and Bookkeeping : Everything you need to know

Businesses can track growth and profitability thanks to bookkeeping. A company may create tactics to help expedite the bookkeeping process in order to increase the efficacy of its bookkeeping. It entails monitoring financial activities and records, guaranteeing the accuracy and timeliness of financial reporting, and offering financial health assessments of businesses.

It is essential for a bookkeeper to possess a solid grasp of the fundamentals of bookkeeping. In this post, we provide a basic explanation of bookkeeping, explain its foundations, and provide examples of some of the activities that a bookkeeper could be responsible for.

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Introduction

The process of documenting financial transactions that take place within an organization is known as bookkeeping. Sales, purchases, receipts, and payments are some examples of these transactions. Any accounting system’s cornerstone, bookkeeping entails gathering, arranging, and recording financial data.

The task of keeping accurate and current financial records falls to bookkeepers. They reconcile accounts to make sure the books are balanced after entering financial transactions into an organization’s accounting system. Additionally, bookkeepers create financial statements that assist business owners in understanding the state of their company’s finances, such as income statements and balance sheets.

What is Bookkeeping and Who is a Bookkeeper?

The term “bookkeeping” describes the routine activities of keeping track of and organizing a company’s financial data. When bookkeeping duties are completed, data such as transactions, expense accrual, and other financial information can be accounted for. Since it makes it possible to track all the financial data required to make wise financial and operational decisions, bookkeeping can be a crucial part of managing a business.

A specialist that oversees the financial activities and documentation of a firm is known as a bookkeeper. A company may guarantee precise and effective recording and administration of its financial assets and liabilities with the help of an effective bookkeeper. This can help with both external and internal business decisions, such as an investor’s decision to fund the company’s operations or where to allocate excess revenue.

Bookkeeping Methods

There are various bookkeeping techniques, such as double-entry and single-entry bookkeeping. Each financial transaction is only recorded once under single-entry bookkeeping, either as an expense or an income. In contrast, every financial transaction is recorded twice in double-entry bookkeeping—as a credit and a debit. The majority of accountants and financial experts favor this approach since it offers a more thorough understanding of a company’s financial situation.

Bookkeeping Systems

You have three options for doing bookkeeping: manually, with a spreadsheet or pen and paper, or with specialist software made just for bookkeeping. Even though manual bookkeeping is labor-intensive and prone to mistakes, small businesses with straightforward financial transactions could find it useful. Larger companies or those with more intricate financial activities typically use specialized bookkeeping software since it is more precise and efficient.

Types of Bookkeeping

Single-entry and double-entry bookkeeping are the two primary forms. Also two other types includes cash-based or accrual-based bookkeeping.

Single-Entry Bookkeeping

A bookkeeping technique known as single-entry bookkeeping records every financial transaction just once. Small enterprises and sole proprietors who have few financial transactions to record usually employ this style of bookkeeping.

Financial transactions are documented in a cash receipts journal and a cash disbursements journal in single-entry bookkeeping. All incoming cash transactions are recorded in the cash receipts log, and all outgoing cash transactions are recorded in the cash disbursements journal.

Double-Entry Bookkeeping

Under double-entry bookkeeping, every financial transaction is entered into the system twice—once as a credit and once as a debit. With more intricate financial activities, larger organizations adopt this bookkeeping technique.

A general ledger is used in double-entry accounting to record financial transactions. Every financial transaction is entered into the general ledger and is recorded as a debit and a credit. To guarantee that the accounting equation (assets = liabilities + equity) is always in balance, the total debits and total credits must be equal.

Cash-based or accrual-based

When your business is cash-based, revenue is recognized as soon as cash is received. When expenses are paid for, they are recorded as incurred. To put it another way, your accounts are recorded in the books whenever money comes in or goes out.This implies that credit-based transactions and sales won’t appear on your records until there are cash exchanges.

Revenue is recorded as soon as it is earned when using the accrual technique.In a similar vein, costs are documented as soon as they are incurred, typically in conjunction with related income.For a transaction to be recorded, physical cash does not need to enter or leave. Sales and credit purchases can be immediately marked.

With single-entry or double-entry bookkeeping, both a cash and accrual basis can be used.Generally speaking, cash-based bookkeeping is built on the single-entry approach. Cash coming in or going out is the only entry used to record transactions. The double-entry system functions well with the accrual basis.

Skills and responsibilities of a Bookkeeper

The specialized talents known as bookkeeper skills allow bookkeepers to carry out their jobs quickly and successfully. These include data input, attention to detail, spreadsheet software proficiency, invoicing, ledger administration, and numeracy. In addition to these technical talents, bookkeepers could find it advantageous to acquire a variety of soft skills that are pertinent to their line of work.

1. Paying close attention to details

Bookkeepers are responsible for maintaining careful records when managing a business’s financial information. This can ease the likelihood that issues or errors will surface and cause more significant variations in a business’s records. Also they are obligated to provide firms with reliable data since they rely on bookkeeping files and workflows to support important business choices.

2. Billing

The process of mark a transaction and describing each charge on a bill is known as invoicing or billing. Bookkeepers that work for companies are usually in charge of the billing procedures. If they can understand invoice documents, they can obtain details about a transaction between buyers and sellers. And with the preparation, reading, and interpretation of invoices, bookkeepers can observe incoming business revenue as well as outgoing the payments.

3. Critical thinking

Bookkeepers use critical thinking to solve problems and overcome complications when working with the company records. They can use it to interpret records and recognize trends, patterns, and irregularities in business transactions. And they can also use it to generate ideas for new path of action based on the information at their destruction.

Bookkeepers rely on critical thinking to produce high-quality work when reconciling bank statements, balancing check books, migrating records, and identifying the source of errors

4. Skills in organization

Bookkeepers sort and plan their tasks using their organizational skills. They might regularly arrange data for both short and long-term tasks. And in order to make financial records efficiently accessible in the future, they might also keep them up to date in a particular system.

5. Interpersonal abilities

Presenting information to clients is one of a critical component of a bookkeeper’s work. In this capacity, it can be advantageous for them and to be able to speak both in person and over email. Bookkeepers may handle the records from several departments at once and then utilize their communication skills to work together internally, arrange deadlines, find documents, and they will clarify information with colleagues.

6. Accuracy

Since the bookkeepers deal with numbers on a daily basis, numeric and basic mathematics skills might be beneficial. This is especially helpful when they discussing reports and numerical data with accountants or other business stakeholders. And processing numbers and carrying out the basic computations like addition, subtraction, and multiplication are among the regular responsibilities performed by the bookkeepers.

7. Effective time management techniques

Another important ability for bookkeepers to possess is time management, and which will enable them to fulfill their responsibilities and meet deadlines while at work. Making a schedule is very important to this function in order to make sure that you will finish all of your assignments. And businesses usually need timely access to correct bookkeeping data in order to support business decision-making.

8. Inputting of data

The ability to quickly and right enter figures into forms and accounting software is known as data entry. The bookkeepers that possess data entry skills and can enter data into digital or physical firm records. This calls for a high level of computer literacy and a rapid learning turn for new technologies. The faster typists might also be able to enter the data more quickly and effectively.

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Salary of a Bookkeeper

The average salary for a bookkeeper in India is 1418 INR per hour. These numbers will reflect the average wages for a bookkeeper who works on a company’s payroll. And in Kerala, the average annual wage for a bookkeeper is approximately ₹2,07,045. Also the Freelance bookkeepers set their own rates and often charge an hourly rate of 3000 INR mostly. If a freelance bookkeeper has multiple clients and works full-time, they frequently earn more than the salaried bookkeeper’s at ₹3,41,208 INR per year.

How to be a Bookkeeper

You have two options for how to pursue a career as a bookkeeper. You have two options that is, either go for a paid job with an organization, or launch your own independent bookkeeping business as well. In both scenario, to start down this professional type, you will need to take the following particular steps:

1. Pursue a high school degree

Numerous bookkeepers hold associate’s or bachelor’s degrees, in contrast to accountants. Employers typically only require a high school diploma or GED from their bookkeepers. The fundamental math, writing, and communication skills required to work as a bookkeeper can be acquired with a high school diploma. High school is also a good place to develop other relevant skills like organization, cooperation, and time management.

Aspiring bookkeepers who earn an Associate’s or Bachelor’s Degree in Business Administration or Accounting will be qualified to work for clients with higher educational requirements, while a college degree is not required. Coursework on computer systems, business law, economics, and financial mathematics will be required for these degrees. In-depth courses in managerial accounting, auditing, and accounting software are further options available to students.

2. Acquire training

The next step will be to start your own bookkeeping service if you would choose to work as a freelance bookkeeper. Before you go freelance, you might wish to work for a year or two in a standard bookkeeping role at a local company or accounting office, as most potential clients would be wanting to hire someone with some real-world experience.

You can use online job boards and other job search resources to start looking for local, remote, or virtual opportunities after you are certain that you have the necessary experience, abilities, and time. By contacting friends, family, and coworkers if they know of anyone who needs a bookkeeper for their business, you may make advantage of your own network.

3. Apply for positions

You should search for local or remote job opportunities if you want to work as a salaried bookkeeper. You must write a strong CV that shows your bookkeeping abilities and lists any relevant professional experience in order to demonstrate your qualifications.

Excellent talents to have include an awareness of personal and business finance, a willingness to learn, and experience with accounting software. If you don’t have any real-world experience, you could be able to make up for it by selling yourself as a dedicated worker with lots of room for advancement.

4. Become a freelancer

Setting up your own bookkeeping business will be the next step if you’re more interested in working as a freelancer. A standard bookkeeping position with a local firm or accounting office may be what you want to hold for a year or two before becoming freelance, as most potential clients will be looking to hire someone with some expertise in the field.You can start looking for local, remote, or virtual jobs using internet job boards and other job search resources after you are certain you have enough experience, knowledge, and free time. Utilize your personal network by getting referrals from friends, family, and coworkers if you know of anyone in the business world who requires a bookkeeper. Online and in the newspaper, you can also place ads.

5. Consider certification

Being certified may be beneficial for both freelancers and salaried employees. You can obtain the designation of Certified Bookkeeper from the American Institute of Professional Bookkeepers or the National Association of Certified Public Bookkeepers. You must work as a bookkeeper full-time for at least two years, or for an equivalent amount of part-time hours, in order to obtain these qualifications.

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Conclusion

Bookkeepers are in charge of managing the day-to-day financial operations of their clients. They supervise, log, and arrange for all incoming and outgoing payments connected to a certain account. The major goal of bookkeepers is to keep their clients’ finances stable and in good standing. Additionally, they safeguard their clients by ensuring that all financial transactions adhere to federal rules and regulations. Bookkeepers can be employed as freelancers or as salaried staff members for businesses or individuals.

Bookkeeping is crucial for a number of reasons. It first assists companies in monitoring their financial activities. By doing this, they may be confident that their financial activity is accurately and current documented. The financial statements that are produced using this data are crucial for making defensible judgments regarding the business’s operations.