Four important services they can offer are KPI monitoring and budgeting, avoidance of late fees and penalties, accurate and rapid reporting, and reconciling of account statements.
"Bookkeepers make business stronger through attention to detail, organization, and constant diligence."
KPIs & Metrics, and Budgeting
Metrics are the measurements of a business- revenue, total expense, cost of goods sold, gross sales, total production, etc. KPIs, or key performance indicators, take those metrics one step further and analyze them as ratios, usually in proportion to total revenue or gross sales to give the business owner an idea of how metrics stack up against each other. Bookkeepers can then compare these KPIs to the budget and to industry standards to see how the health of the organization is in comparison to the goal (budget) and to others in the space. This helps answer questions such as- can we afford to hire a new employee? And should we discontinue a certain product line? And Is one of our locations more profitable than the other? Bookkeepers measure the health of businesses in terms of metrics and KPIs, report on them in clear ways, and help the business owner make major decisions based on that information.
Late Fees, Penalties, and Overdraft Charges
Late fees, penalties, and overdraft charges can all be avoided with timely bookkeeping, provided there is enough cash flow to cover expenses. When an organization with a bookkeeper receives an invoice, that invoice will be approved by the business owner and paid in a timely manner- no late fees! The same goes for late sales tax payment penalties. A thorough bookkeeper keeps an eye on 1099 contractor payments and W2s, and files them correctly and on time avoiding costly penalties. Overdraft charges are a thing of the past when business owners follow a bookkeeper’s advice to keep operating expenses to 30% of gross profit margin and manage accounts payables twice per month. The bookkeeper will also know when large payments will be coming out of the operating expenses checking account and can prepare by making necessary transfers and adjustments beforehand.
Reporting for Loans and Taxes
All business owners know that tax time can be hectic and frustrating, but if accurate reporting is maintained all year long, there will not be any surprises. Some expenses are tax deductible, and some are not. Recording tax deductible expenses and supporting transactions with receipt data is the best way to achieve a large tax payment savings from federal and state governments. A bookkeeper can create a chart of accounts that clearly shows tax deductible expenses so that the organization will have a clear picture of what is being saved and spent each month. This creates smooth annual reporting and no sweat for tax payments and filings.
Another reason excellent bookkeeping is excellent for business is most evident when it comes time to apply for a loan. All the bank statements you need will be readily available in the accounting software. All of the income statements, balance sheets, and statements of cash flows for any period can be pulled in the blink of an eye. Great amounts of time and frustration can be saved during the application process with accurate, timely bookkeeping.
Reconciling for Accuracy and Fraudulent Charges
Reconciling is the act of comparing your account statements to your transactions. A good bookkeeper will review your transactions every business day, upload receipt documentation, and categorize said transactions into their proper accounts. At the end of the month, the bookkeeper will then align the transactions with the bank, credit card, and/or loan statements to make sure every transaction is accounted for. Reconciling gives the bookkeeper a second opportunity to review transactions for fraud. Having each transaction in its proper place is important for accurate reporting to describe the businesses financial position as well as for reporting to tax authorities.
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