Many experts believe (and vocally declare) that every business needs a bookkeeper.
Technology’s capabilities have surpassed the need for human involvement in all but the most complex business accounting tasks. So, why do small businesses still phone bookkeepers to help them get organized and compliant? Because they’re in the dark, wondering, “What does a bookkeeper do, exactly?” If they knew the answer to this question — the role of this financial professional — then they’d realize many of their tasks can be automated.
Researchers at Gartner have concluded that nearly nine out of ten general accounting tasks are highly automatable.
Source: Gartner Webinar: “Why Your Organization Needs RPA”
Realizing this power would put business owners back in control of their finances — without investing the valuable time once required to stay organized.
Here, we’ll list the duties a typical business bookkeeper handles, plus a 10-second (tops) tutorial on how to automate each task. By the end, you’ll be able to decide for yourself whether your small business still needs an expert to do the work.
What does a bookkeeper do? They administer outgoing invoices for goods and services sold
A small- to mid-market business bookkeeper creates, sends, and collects on your organization’s invoices, so you’re paid for what you provide.
Create and send Invoices
First, a good bookkeeper generates and sends invoices to your customers, double-checking for accuracy and ensuring timely delivery. They make it a point to understand your revenue streams and business model, so they can anticipate income from multiple sources. Bookkeepers also send follow-up communications, late notices, and reminders to customers, so your backlog of receivables doesn’t become unmanageable or turn into an unrecoverable loss.
When revenue comes in, your bookkeeper will route it to the right account. As they receive payments and make bank deposits, they check to make sure those accounts reflect your true income.
A good bookkeeper will then record double-entry transaction information into your general ledger. Finally, they reconcile these transactions against the business’s financial institution’s records. If ever the two mismatch, your bookkeeper hunts down the origin of the discrepancy and fixes the error or adapts the transaction to reflect reality.
Why and How to do this yourself
If this sounds like a lot of work, you’re right. The good news is that most of it can be automated. Automating work means that neither you nor a bookkeeper need to handle it.
Letting a software program do the work saves you time and effort. Plus, it requires much less financial savvy from you than a bookkeeper applies to the job. It also saves you the cost of another human’s mental and manual input.
Best of all, though, automating accounts receivable like this mitigates the risk of human-involved error. For a perspective on what that may be, listen in on the informal banter of accountants who lament (and sometimes laugh about) other accountants’ income-handling mistakes.
Another reason not to hand over customer relationships to a bookkeeper is that these valuable interactions must be handled by you and your customer-facing employees. Customer care shouldn’t be outsourced in this way. The paperwork, however, can — and should — be automated.
Ready to get started? Begin a free 15-day trial of Neat. From there, connect your bank account to capture streaming transactions. When you do, you’ll see the app begin to match those transactions with the invoices you’ve sent out. What you won’t see is the program parsing and extracting data for future retrieval and reporting.
Congratulations! Instead of hiring a bookkeeper, you’ve just begun automating invoice creation and management while personally handling the relationships behind them.
What does a bookkeeper do? They manage purchase orders
Bookkeepers also receive and administer the invoices of others since your business isn’t just a product/service provider — it’s also a consumer.
administer payments to contractors, suppliers, etc.
A good bookkeeper accepts incoming vendor invoices and sends funds owed to your vendors and service providers. This means they use your business’s credit cards, debit cards, and checkbook.
Then, they record all of these outflows and their metadata in the company’s general ledger. Finally, they reconcile these transactions with the bank statements once again for up-to-date, reliable, neatly matching totals.
Why and how to do this yourself
Again, if you’re not sure why you’d keep such duties in-house when you’re already so busy, remember the power of automation:
- It’s safer. Recent headlines are a sobering reminder of the risk of human involvement in accounts payable.
- One California bookkeeper shaved a portion off her employer’s payroll totals regularly to line her own pockets. Eventually, she was found out and ordered to repay nearly $1M.
- Another bookkeeper was just charged with a similar style of embezzlement of more than $5M from her employer, an agricultural business.
- It’s faster. Automatic bookkeeping completes a task instantaneously.
- It’s more reliable. Automation works on your behalf around the clock. It doesn’t take sick days or lunch breaks.
- It’s liberating. Now you know what a bookkeeper does and what automation can do. The resulting knowledge lets you computerize the tedium while white-gloving the interpersonal portion of the work.
Vendor terms must be negotiated and maintained by a human. The repetitive administrative work, however, does not.
To make this change, again, turn to your new Neat app. Upload or snap a picture of each receipt or payment confirmation, and Neat does the rest. The program parses the data and matches your receipt to its applicable transaction. Next, it pairs the transaction with your bank’s record of the exchange. Finally, it stores all the metadata securely, and that data is accessible for instant recall anytime you need it.
What does a bookkeeper do? They prepare and deliver financial reports
Operating a business is much like driving a car. You need a set of mirrors to see what’s behind you — but even more important is the windshield through which you view the future. Financial reports created by a bookkeeper provide both.
create the “big 3” statements
Financial statements can help you determine what wiggle room you have available (what you can spend) and when it’s smarter to suspend capital investments.
- The Balance Sheet is the one that best shows your overall business health by giving you a peek into your liabilities and equity — and how those represent the company’s total assets.
- The Income Statement (and/or the profit-and-loss report) gives you a snapshot in time that depicts your business’s profitability.
- Your Statement of Cash Flows shows you how your accrual accounting method translates into usable, liquid cash.
A good bookkeeper keeps your general ledger tidy, accurate, and up-to-date so that the creation of these statements is simply one more administrative step. Then, they provide these financial reports to you or your accountant for analysis and business strategy.
Why and how to do this yourself
You can — and should — generate the data for your financial statements automatically. Why? Because having this done automatically is faster. It’s also much safer. While deliberate fraud is rare, the stakes are high. One bookkeeper who stole $300,000 from their employer did it by fudging the company’s financial statements to keep the crime a secret… for a decade.
Thankfully, once again, Neat automates the clerical portion of this process. In fact, every time you open the app, you’re given a snapshot of your company’s current cash flow, so you don’t need to wait until the month’s end to see what (or when) cash is coming in or going out.
What does a bookkeeper do? They store all data securely and neatly
Bookkeepers — like most business services — adapted to the pandemic and are now operating remotely more than ever. Accounting Today reports that cyberattacks have tripled since the beginning of the pandemic. It’s more important than ever that they handle customer data with care.
Extract data from every transaction for analysis/decision-making
Every transaction is unique. Its identifying properties must be liberated from source documents (receipts, invoices, agreements, purchase orders, and more) for data analysis. For example, you should be able to “ask questions” of your data like:
- How much did I spend on my favorite type of printer toner last year?
- What did I spend — on average — on office electricity in Q2 of the last five years?
- How many times have we ever bought and sent loyalty rewards to our returning customers?
Sadly, bookkeepers typically don’t extract any of the various data points characterizing each transaction.
Keep all data points safely retrievable — and give permissions to qualified officers
Historically, file cabinets were used to keep the original hard copies of files. When a business owner wanted answers to random questions, they would have to weigh the benefit of that intelligence against the time and energy required to retrieve it.
These days, most bookkeepers have graduated to flash drives, external hard drives, or even storage sites like Dropbox. And while these newer data storage tools are an upgrade, they’re simply digital file cabinets, unable to surface insights that answer your pressing questions.
Why and how to do this yourself
Technology has surpassed yesterday’s file storage solutions, which is great news for your security. The adoption of cloud technology means that business owners now have access to the same top-of-the-line storage solutions as enterprise organizations.
And that’s good news because when you outsource your storage, you also outsource your security. Financial institutions and services providers like bookkeepers are more than 30% more likely to be attacked by cyber criminals. According to the Wall Street Journal, small companies like bookkeeping service providers are also less likely to prepare for a data breach, making your information even more vulnerable.
The good news is that when you use Neat, your data is encrypted using the same standard that banks, the federal government, and credit agencies use. Then, that encrypted data is kept securely with Neat (no third-party partners). We engage the world’s best data center providers to host our software and applications and actively monitor our infrastructure 24/7/365. In other words, we’ve come full circle: your data can now be more secure and accessible when it’s back in your own possession.
Alone, you can’t do your bookkeeping. But with Neat, you can
Business owners have always grappled with the question of whether they can handle their own bookkeeping. There’s always been “that threshold,” a shifting, grayish line that determines when the clerical work becomes too much, and the business owner must reclaim their time by hiring help.
But technology has changed that transition. It has automated away much of the work a bookkeeper does. Now, business owners needn’t choose between risky, unreliable bookkeepers and the time-consuming alternative of handling it themselves. Labor trends confirm this, showing the bookkeeping profession being automated away as technology empowers more and more business owners to do the work more quickly and effortlessly themselves.
Are you ready to become one of those empowered business owners? Reclaim ownership over your company’s finances (as well as your time!) by signing up for a free 15-day trial of Neat today.