Hiring a bookkeeper can be a big step for a business owner.
Maybe you have been handling the bookkeeping yourself and it is taking more of your time. Maybe your books have fallen behind. Maybe you are not confident that everything in QuickBooks is being recorded correctly. Or maybe your business has simply grown to the point where you need someone with more experience keeping an eye on the financial side of the business while you handle the business.
Whatever brings you to this point, it helps you to know what you should expect when you hire a professional bookkeeper.
A good bookkeeping relationship should give you more than entered transactions. It should give you accurate records, dependable financial information, and confidence that someone is paying attention to what is happening in your books.
1. Expect Some Questions at the Beginning
A good bookkeeper should want to understand your business before they begin working on your books.
You may be asked questions such as:
- What does your business do?
- How do you get paid by your customers?
- How do you pay your vendors?
- How many bank and credit card accounts do you use?
- Do you have employees or independent contractors?
- Do you invoice customers?
- Do you carry accounts receivable or accounts payable?
- Do you have loans, equipment, or other significant assets?
- How are payroll and sales tax handled?
- Who prepares your tax returns?
- Are there any bookkeeping problems you already know about?
For some industries, there may be additional questions. A construction company, for example, may need to discuss job costing, retainage, work in progress, and how revenue and expenses are tracked by project.
These questions are not unnecessary paperwork. They help your bookkeeper understand how money moves through your business and how your accounting system should be structured.
2. Expect Your Existing Books to Be Reviewed
Before taking over your bookkeeping, an experienced bookkeeper should look at the condition of your current books.
That review may include looking at:
- When your bank accounts were last reconciled
- When your credit cards were last reconciled
- Whether old transactions remain outstanding
- Accounts Receivable
- Accounts Payable
- Undeposited Funds
- Uncategorized income and expenses
- Loan balances
- Payroll liabilities
- Sales tax liabilities
- Negative or unusual balance sheet accounts
- Duplicate transactions
- Whether personal and business activity has been mixed together
- Whether the Chart of Accounts makes sense for your business
This is important because a new bookkeeper cannot necessarily begin with today’s transactions and ignore problems from prior months.
If the beginning balances are wrong, the current financial statements may also be wrong.
3. You May Need Cleanup or Catch-Up Work First
Many business owners are surprised when they hire a bookkeeper and learn that their books need cleanup before regular monthly bookkeeping can begin.
That does not mean anyone did something intentionally wrong.
QuickBooks makes it relatively easy to enter transactions, but entering a transaction is not the same thing as accounting for it correctly.
Common cleanup issues include:
- Duplicate income
- Transactions posted to the wrong accounts
- Bank accounts that have not been reconciled
- Old checks or deposits that should no longer be outstanding
- Payments applied incorrectly
- Undeposited Funds balances that do not make sense
- Credit card payments recorded as expenses
- Loan payments recorded entirely to expense
- Payroll transactions posted incorrectly
- Accounts Receivable or Accounts Payable balances that are not accurate
If cleanup is needed, your bookkeeper should explain what they found, what needs to be corrected, what the cleanup is expected to accomplish, and how much the project will cost.
4. Expect to Provide Documents and Access
Even the best bookkeeper cannot keep accurate books without information.
You may need to provide access to or copies of:
- Bank statements
- Credit card statements
- Loan statements
- Merchant processor reports
- Payroll reports
- Sales tax reports
- Customer invoices
- Vendor bills
- Equipment purchase documents
- Loan agreements
- Closing statements
- Prior tax returns
- Accountant adjustments
- Other supporting documentation
You may also be asked to provide “accountant” access to QuickBooks Online and read-only access to certain financial accounts, such as checking accounts, loan accounts and credit card statement activity.
Your bookkeeper should explain what access is needed and why.
5. Expect Regular Bank and Credit Card Reconciliations
The most important thing a bookkeeper does is reconcile your financial accounts.
Reconciliation means comparing the transactions recorded in your accounting system to the actual bank, credit card, or loan statement and making sure they agree.
This helps identify:
- Missing transactions
- Duplicate transactions
- Incorrect amounts
- Transactions recorded to the wrong account
- Checks that have not cleared
- Deposits that have not cleared
- Bank fees
- Interest
- Possible unauthorized activity
Using bank feeds in QuickBooks Online is great! But using bank feeds is not a substitute for reconciliation.
Seeing transactions come into QuickBooks does not prove that the books are correct.
Ideally, every bank, credit card, and loan account on your balance sheet should be reconciled monthly.
6. Expect Questions From Your Bookkeeper
Your bookkeeper will probably need information from you from time to time.
For example:
“What was this $2,800 payment for?”
“Was this purchase business or personal?”
“Is this deposit customer income, a loan, or an owner’s contribution?”
“Did you purchase or finance this vehicle?”
“Is this customer balance still collectible?”
Those questions are a good thing. You want a bookkeeper who investigates unusual transactions rather than guessing. Good bookkeeping often involves a little detective work.
Your responsibility is to answer questions and provide documents in a reasonable amount of time so the books can be completed accurately.
7. Expect Your Books to Be Closed on a Regular Schedule
Monthly bookkeeping should have a routine. After the month ends, your bookkeeper may:
- Make sure transactions have been entered.
- Reconcile bank and credit card accounts.
- Review Accounts Receivable and Accounts Payable.
- Review balance sheet accounts.
- Record loan activity and other adjustments.
- Investigate unusual transactions or balances.
- Make necessary corrections.
- Prepare financial reports.
- Close or lock the accounting period.
The timing will vary depending on the business and how quickly information is provided.
The goal is to create a clear cutoff so that last month’s financial statements do not continue changing months later. There is no reason to provide you with financial statements if you will continue to make changes to that month. They will no longer be accurate and become a moot point.
8. Expect More Than a Profit and Loss Statement
Most business owners naturally focus on the Profit and Loss Statement. It tells you whether the business generated income or a loss during a particular period. But it is only part of the financial picture.
Your bookkeeper or accountant may also provide or review:
Balance Sheet
This shows what the business owns, what it owes, and the owner’s equity at a specific point in time.
Accounts Receivable Aging
This shows who owes you money and how long those balances have been outstanding.
Accounts Payable Aging
This shows what you owe vendors and when those bills are due.
Statement of Cash Flows
This helps explain where cash came from and where it went.
Industry-Specific Reports
Depending on your business, you may also need job profitability reports, work-in-progress schedules, retainage reports, departmental reporting, location reporting, or other management reports.
Your financial reports should help you understand your business—not simply satisfy a bookkeeping requirement.
Your bookkeeper needs to know what reports you need to make better business decisions. Don’t be shy, if you need more reports than you are receiving, let the bookkeeper know.
9. Expect Your Bookkeeper to Notice Things
A professional bookkeeper will often notice changes before the business owner does.
For example:
- Expenses are increasing faster than revenue.
- A customer is consistently paying late.
- Accounts Receivable is growing.
- Cash is getting tighter.
- A loan balance does not match the lender’s statement.
- Gross profit has changed significantly.
- A particular expense account looks unusually high.
- Payroll costs are increasing.
- Sales tax liabilities do not look right.
- A job appears less profitable than expected.
Your bookkeeper may not make every business decision for you, but they should help make sure you have reliable information to make those decisions.
10. Do Not Expect Your Bookkeeper to Make Business Decisions Without You
There is an important difference between bookkeeping and running your business.
Your bookkeeper can explain what the numbers show and point out something that looks unusual. But this is your business and you have to make the final decision when it comes to your bookkeeping and running your business. Some of these items require you to work with your bookkeeper and others are made as a result of accurate books. Some of them are:
- Whether a customer balance should be written off
- Whether an expense was personal or business
- Whether to hire another employee
- Whether to purchase equipment
- How much money you should take out of the business
- Whether to raise prices
- Whether a particular project or customer relationship should continue
Good financial information supports business decisions. It does not replace the business owner’s judgment.
11. Expect Your Bookkeeper and Tax Professional to Work Together
Bookkeeping and tax preparation are closely related, but they are not the same service.
Your bookkeeper maintains the financial records throughout the year. Your tax professional uses those records to prepare tax returns and provide tax advice. When these professionals work together, year-end tax preparation is usually much easier.
Your bookkeeper may provide your CPA or tax preparer with:
- Financial statements
- General ledger reports
- Bank reconciliation reports
- Loan balances
- Asset purchases
- Payroll information
- Accounts Receivable and Accounts Payable reports
- Other year-end schedules
Your tax professional may then provide adjusting entries for depreciation, taxes, or other year-end items that need to be recorded in the books.
Ideally, your bookkeeping records should be tax-ready before they reach your tax preparer.
Finding a bookkeeper that will work in a “team-approach” with your tax preparer, your auditor, your financial advisor, your legal team and even your insurance agent will help you tremendously and will reduce your stress level.
12. Expect Confidentiality and Professionalism
Your bookkeeper will have access to some of the most sensitive information in your business.
That can include:
- Bank balances
- Payroll information
- Employee compensation
- Customer information
- Vendor information
- Loans
- Debt
- Profitability
- Owner distributions
- Tax information
You should feel comfortable asking how your information is protected and who has access to it.
Trust is an important part of the bookkeeping relationship.
13. Expect Clearly Defined Responsibilities
One of the best ways to avoid confusion is to clearly define who is responsible for what. Your bookkeeper should supply you with an “engagement letter” that spells out who is responsible for what.
For example, your engagement letter may specify whether the bookkeeper is responsible for:
- Entering bills
- Paying bills
- Creating customer invoices
- Recording customer payments
- Reconciling accounts
- Running payroll
- Filing payroll tax returns
- Filing sales tax returns
- Preparing 1099s
- Tracking fixed assets
- Preparing monthly financial statements
- Communicating with your tax preparer
Do not assume that “monthly bookkeeping” includes every financial task in your business.
The services included should be clearly explained before the work begins.
14. Expect to Remain Involved in Your Business Finances
Hiring a bookkeeper does not mean you should completely stop looking at your numbers.
In fact, having reliable bookkeeping should make it easier for you to become more informed about your business.
You should still know:
- Approximately how much cash you have
- Who owes you money
- What major bills are coming due
- Whether the business is profitable
- Whether debt is increasing or decreasing
- What your biggest expenses are
- Whether your financial results are improving or declining
You do not need to become an accountant. But you should understand the financial story of your own business.
A good bookkeeper can help you do that.
What Should You Expect From a Good Bookkeeper?
At a minimum, you should expect someone who:
- Pays attention to detail
- Reconciles accounts regularly
- Asks questions instead of guessing
- Explains things in language you can understand
- Communicates when information is missing
- Protects your confidential information
- Keeps your records organized
- Points out unusual balances or activity
- Understands the difference between bookkeeping and tax preparation
- Is willing to work with your CPA or tax professional
- Helps keep your books accurate, organized, and tax-ready
Perhaps most importantly, you should expect someone who takes your books seriously.
Your accounting records are not simply a requirement for filing a tax return.
They are one of the tools you use to understand how your business is doing.
Thinking About Hiring a Bookkeeper?
If your bookkeeping takes too much of your time, your books are behind, or you are no longer confident that your QuickBooks records are accurate, it may be time to bring in professional help.
At Melton Bookkeeping & Accounting Services, I work with established small businesses that want accurate books, dependable financial information, and someone who will take the time to understand what is happening in their business. I take the team-approach to working with my clients. With the client’s permission, I share information with your tax preparer, your financial advisor and other professionals you specify. This decreases the questions you have to handle and reduces your stress.
Whether you need ongoing bookkeeping, cleanup and catch-up work, or help determining what needs to be corrected in QuickBooks, the first step is understanding where things stand today.
Still comparing options? Read how to choose the right bookkeeper for your business.
If you are looking for professional small business bookkeeping services, call Melton Bookkeeping & Accounting Services at 417-630-0057.
