The Importance Of Professional Bookkeeping Services In Finance Industry™

Having a business which operates in cost of virtual assistant the finance industry is not an easy feat. Aside from managing every aspect of the business, you also have to carefully monitor all of the finances which go in and out in the business.

Your customers entrusted you with their money, so if you can’t meet their expectations, your business will create a negative image in the market. This can disrupt your business growth and success. If you own a bank, credit card or insurance company, you should consider hiring professional bookkeeping services. Hiring them might require money from your pocket, but their services can become a cost-effective solution for your business, especially if you’re still new in the industry.

Being a business owner means that you’ll have a lot of responsibilities on your plate. Fortunately, you don’t have to do all of these alone because you can actually outsource professional services. They can accomplish tasks on your behalf. Professional bookkeeping services generally have bookkeepers who have sufficient training and experience to manage your business’ financial health effectively. Services such as these are important to the finance industry because:

1. You’ll get an unbiased financial opinion: When you’re still a neophyte in the business arena, you can hire a bookkeeper to work for your business. This person can solely focus on keeping track of your business’ finances, assess any problems along the way and come up with solutions as soon as possible.

Hiring professional bookkeeping services is a good option because of the number of benefits it can provide to your business such as:

• Professional bookkeeping services are made of bookkeepers who aren’t technically part of your company. This means that their services are external and they’ll only be there to provide financial insights for your business. They’ll assess your business’ financial health and create solutions suitable for the situation.
• Professional bookkeeping services, especially those who’ve been operating for years, have experience dealing with different kinds of financial problems for different businesses. Hiring them means you’ll be provided with solutions which you know will work since these strategies were already used and practiced in the industry.

2. You’ll avoid conflict of interest: When you’re involved in a partnership with another business, entrusting the accounting roles to one business can be risky. Problems which can include accusations of misconduct and error in record keeping (although unintentional) can be experienced down the road and can become reasons why your business will close. You might even end up in a situation where you have to choose between what’s best for your own business or what’s best for the company as a whole. Hiring professional bookkeeping services saves you from situations like these. Since these professionals aren’t directly connected to any business, hiring them will provide peace of mind to business owners. They will only provide accounting statements which are accurate and free from any bias.

3. You’ll lower costs: Regardless of the nature and size of your business, money is an important resource. You’ll have to be thrifty with your finances because most often than not, you still don’t have a steady source of income. Hiring professional bookkeeping services can help lower your costs in the long run. Outsourcing professionals for your accounting needs means you won’t have to hire full-time accountants, pay for their monthly salary and mandated benefits.

4. You’ll have the ability to fulfill your tax obligations: When you’re a business owner, you don’t only have to manage your operations and employees, but you also have to fulfill your tax obligations. Although this is only done annually, you’ll have to compile a lot of financial records as evidence that your business is actually paying the required taxes in your state. If your financial records are inaccurate or incomplete, you’ll have to rush through different records during the tax season. In some cases, you might have to comply with a year’s worth of work in one day.

Hiring professional bookkeepers help in ensuring that you don’t have to experience any of these inconveniences. They’ll be responsible in compiling all of your financial documents, so when the tax season comes, you don’t have to worry about anything. You’ll just have to pull out your financial records, and you’re good to go.

5. You’ll experience improved management and financial analysis: When you’re a business owner, you’ll have to wear several hats at the same time. And while you might be too occupied with a lot of things for your business, it’s important that you have the time to focus on your business’ cash flow. When invoices are delayed even for a day, you’ll have no way to know when customers should pay. This can become a reason why your business could run into trouble long term. Aside from monitoring your business’ cash flow, hiring professional bookkeeping services also allows you to create an organized system for your business operations. This can guarantee that your business will run smoothly for the longest time possible.

6. You’ll be able to come up with better decisions: When you hire professional bookkeeping services, all of your financial records are accurate and timely. With this information, you’ll know how much progress your business is making during a specific time frame. When you’re fully aware of how your business is doing, you’ll know which things to consider to come up with a better decision. You’ll know what should and shouldn’t be done based on the financial health of your business. And since your financial records are organized properly, you’ll have enough documents to supplement your decisions.

7. You’ll provide necessary reports to investors: Once your business grows over time, you’ll be able to attract a lot of investors who’ll be interested in partnering with you. Aside from knowing the details of your operations, these investors will also require financial records to determine if your business is financially stable. You can make this process easier with professional bookkeeping services. As mentioned, professional bookkeeping services can keep accurate and updated financial records of your business, making it convenient for investors to determine how your business is progressing.

Make The Right Investment

Starting up and managing a business long-term is challenging. You’ll have to hire the right people, find the best suppliers and come up with products and services which can be enticing to your target audience. However, when you decide to have a business in the finance industry, more is expected of you. You’ll experience twice the amount of stress, and you’ll have to accomplish more tasks than most business owners. Hiring professional bookkeeping services can make your life easier as a business owner in more ways than one. Their services might come with a price but hiring them can be an excellent investment.

Keeping Good Records, Bookkeeping And Knowing The Difference™

The hardest distinction by far for many of my new business clients – and sometimes tax clients – is the difference between keeping records and having bookkeeping in place.

We do these things throughout the year, but never do we put a name to the task. And, if you ever have had the IRS or state agency audit you, you find out quickly what is or is not missing.

Keeping records means placing aside certain paperwork for proof. Whether it is a new dishwasher and you want to keep the record of purchase for warranty purposes, or the forms and filing documents with accompanying letters for the creation or dissolution of your business, these constitute “keeping records.”

If you have rental or property held for investment, record keeping is very important, as it could mean the difference between paying taxes at sale or conversion or not. Information other than the closing statements for this type of property would be loan origination and depreciation statements showing the amount that was written off every year. (Folks are amazed at this). As the IRS says, “allowed or allowable” and I add, “a deduction not taken is a deduction missed.”

Business with employees have more records to keep, but the idea is the same – back up for the who, when, what of employment of the individuals, plus federal and state tax filings. Even if you use an outside service or accountant to help with calculating payroll, it is still the responsibility of the employer to keep records. There is nothing worse than having an employer have a worker’s compensation or employment security audit and find out they never kept copies of anything.

When we begin to balance our checkbook, we are in fact doing bookkeeping. That is recording our income and expenses. Businesses go further by placing expenses in various categories to make preparing tax returns or loan papers a breeze (and less hair-pulling at tax time). If you keep a family budget, you, too, are doing what business people do.

Bookkeeping does not have to be difficult, just a record of invoices or receipts of income, your checkbook for the business, cash receipts and wage journal of some sort.

One last point to this is if you don’t know, ask. The IRS has publications on Keeping Business Records (Publication 583), Depreciation (Publication 946), and Travel, Entertainment and Car Expenses including mileage logs (Publication 463). These are free and available for download as a pdf on the Internal Revenue Service website.

Make the job of the auditor easier – and your stress level lower – by having your records and bookkeeping in order, and a favorable outcome can be achieved.

Karen best data entry company S. Durda, EA, President of Century Accounting and Tax Services, Inc., has been in the profession since 1984. As an Enrolled Agent credentialed by the Treasury Department, she has the rights as afforded by Congress to represent individuals and businesses before tax authorities. Since May 2012, she has also had the distinction of being a Dave Ramsey Endorsed Local Provider, assisting in budgeting and financial peace for a four-county area and parts of Myrtle Beach.As a Qualified Business expert with the New Hanover County courts, she has experience and knowledge of various scopes of professions and industries, such as medical, health services, legal, construction, retail, real estate, auto sales and service, insurance and restaurant. Continuous tax law courses throughout the year keep her up-to-date on all tax rules, regulations and law changes, as well as business trends, to better serve her clients.

Accountants Do Not Share Their View™

Did you know? To make the topic of Bookkeeping even easier to understand, we created a collection of premium materials called AccountingCoach PRO. Our PRO users get lifetime access to our bookkeeping seminar videos, cheat sheet, flashcards, quick tests, tests for prospective employees, guide to bookkeeping concepts, and more.

The term bookkeeping means different things to different people:

Some people think that bookkeeping is the same as accounting. They assume that keeping a company's books and preparing its financial statements and tax reports are all part of bookkeeping. Accountants do not share their view.

Others see bookkeeping as limited to recording transactions in journals or daybooks and then posting the amounts into accounts in ledgers. After the amounts are posted, the bookkeeping has ended and an accountant with a college degree takes over. The accountant will make adjusting entries and then prepare the financial statements and other reports.

The past distinctions between bookkeeping and accounting have become blurred with the use of computers and accounting software. For example, a person with little bookkeeping training can use the accounting software to record vendor invoices, prepare sales invoices, etc. and the software will update the accounts in the general ledger automatically. Once the format of the financial statements has been established, the software will be able to generate the financial statements with the click of a button.

At mid-size and larger corporations the term bookkeeping might be absent. Often corporations have accounting departments staffed with accounting clerks who process accounts payable, accounts receivable, payroll, etc. The accounting clerks will be supervised by one or more accountants.

Our explanation of bookkeeping attempts to provide you with an understanding of bookkeeping and its relationship with accounting. Our goal is to increase your knowledge and confidence in bookkeeping, accounting and business. In turn, we hope that you will become more valuable in your current and future roles.

Note: You can earn any or all of our seven Certificates of Achievement for Adjusting Entries, Debits and Credits, Financial Statements, Balance Sheet, Cash Flow Statement, Working Capital and Liquidity, and Payroll Accounting when you upgrade your account to PRO Plus.

Bookkeeping: Past and Present

Bookkeeping in the Old Days

Prior to computers and software, the bookkeeping for small businesses usually began by writing entries into journals. Journals were defined as the books of original entry. In order to reduce the amount of writing in a general journal, special journals or daybooks were introduced. The special or specialized journals consisted of a sales journal, purchases journal, cash receipts journal, and cash payments journal.

The company's transactions were written in the journals in date order. Later, the amounts in the journals would be posted to the designated accounts located in the general ledger. Examples of accounts include Sales, Rent Expense, Wages Expense, Cash, Loans Payable, etc. Each account's balance had to be calculated and the account balances were used in the company's financial statements. In addition to the general ledger, a company may have had subsidiary ledgers for accounts such as Accounts Receivable.

Handwriting the many transactions into journals, rewriting the amounts in the accounts, and manually calculating the account balances would likely result in some incorrect amounts. To determine whether errors had occurred, the bookkeeper prepared a trial balance. A trial balance is an internal report that lists 1) each account name, and 2) each account's balance in the appropriate debit column or credit column. If the total of the debit column did not equal the total of the credit column, there was at least one error occurring somewhere between the journal entry and the trial balance. Finding the one or more errors often meant spending hours retracing the entries and postings.

After locating and correcting the errors the bookkeeping phase was completed and the accounting phase began. It began with an accountant preparing adjusting entries so that the accounts reflected the accrual basis of accounting. Adjusting entries were necessary for the following reasons:

• additional revenues and assets may outsource data entry have been earned but were not recorded
• additional expenses and liabilities may have been incurred but were not recorded
• some of the amounts that had been recorded by the bookkeeper may have been prepayments which are no longer prepaid
• depreciation and other non-routine adjustments needed to be computed and recorded

After all of the adjustments were made, the accountant presented the adjusted account balances in the form of financial statements.

After each year's financial statements were completed, closing entries were needed. The purpose of closing entries is to get the balances in all of the income statement accounts (revenues, expenses) to be zero before the start of the new accounting year. The net amount of the income statement account balances would ultimately be transferred to the proprietor's capital account or to the stockholders' retained earnings account.

Bookkeeping Today

The electronic speed of computers and accounting software gives the appearance that many of the bookkeeping and accounting tasks have been eliminated or are occurring simultaneously. For example, the preparation of a sales invoice will automatically update the relevant general ledger accounts (Sales, Accounts Receivable, Inventory, Cost of Goods Sold), update the customer's detailed information, and store the information for the financial statements as well as other reports.

The accounting software has been written so that every transaction must have the debit amounts equal to the credit amounts. The electronic accuracy also eliminates the errors that had occurred when amounts were manually written, rewritten and calculated. As a result, the debits will always equal the credits and the trial balance will always be in balance. No longer will hours be spent looking for errors that occurred in a manual system.

CAUTION: While the accounting software is amazingly fast and accurate in processing the information that is entered, the software is unable to detect whether some transactions have been omitted, have been entered twice, or if incorrect accounts were used. Fraudulent transactions and amounts could also be entered if a company fails to have internal controls.

After the sales invoices, vendor invoices, payroll and other transactions have been processed for each accounting period, some adjusting entries are still required. The adjusting entries will involve:

• revenues and assets that were earned, but not yet entered into the software
• expenses and liabilities that were incurred, but not yet entered into the software
• prepayments that are no longer prepaid
• recording depreciation expense, bad debts expense, etc.

The adjusting entries will require a person to determine the amounts and the accounts. Without adjusting entries the accounting software will be producing incomplete, inaccurate, and perhaps misleading financial statements.

After the financial statements for the year are released, the software will transfer the balances from the income statement accounts to the sole proprietor's capital account or to the stockholders' retained earnings account. This allows for the following year's income statement accounts to begin with zero balances. (The balance sheet accounts are not closed as their balances are carried forward to the next accounting year.)

Recording Transactions

Bookkeeping (and accounting) involves the recording of a company's financial transactions. The transactions will have to be identified, approved, sorted and stored in a manner so they can be retrieved and presented in the company's financial statements and other reports.

Here are a few examples of some of a company's financial transactions:

• The purchase of supplies with cash.
• The purchase of merchandise on credit.
• The sale of merchandise on credit.
• Rent for the business office.
• Salaries and wages earned by employees.
• Buying equipment for the office.
• Borrowing money from a bank.

The transactions will be sorted into perhaps hundreds of accounts including Cash, Accounts Receivable, Loans Payable, Accounts Payable, Sales, Rent Expense, Salaries Expense, Wages Expense Dept 1, Wages Expense Dept 2, etc. The amounts in each of the accounts will be reported on the company's financial statements in detail or in summary form.