What does a bookkeeper do?

The short answer

A bookkeeper records every financial transaction your business makes, checks that record against the bank and card statements, and produces a set of financial statements at the end of each month. That's the core of it. Everything else either supports that record or depends on it.

Most owners already have the raw material: a business bank account, a card or two, a payment processor, a stack of bills and invoices. What they lack is a single place where all of it has been sorted, matched and checked. Software can import transactions automatically, but importing isn't the same as bookkeeping. A feed will happily pull in a transfer between your own accounts and record it as income. Someone has to notice.

The question bookkeeping answers is simple: what actually happened? How much came in, what went out, what you owe, what you are owed. Good decisions about pricing, hiring or borrowing all start from an honest answer to that question.

The monthly rhythm

Bookkeeping works best as a routine with a defined finish line each month, usually called the close. The exact steps vary by business, but the pattern is consistent.

Doing these steps monthly, rather than in one big push before tax season, matters more than it might seem. A question about a $900 charge is easy to answer three weeks later and nearly impossible eleven months later. Monthly work also means problems surface while they can still be fixed: a customer who never paid, a supplier who raised prices without notice, a card that was used after an employee left.

• Collect: bring in bank and card activity, processor deposits, bills, receipts and sales records.
• Categorise: assign each transaction to the right account in the chart of accounts, so rent lands in rent and software lands in software.
• Reconcile: match the books to every bank, card and loan statement so the balances agree to the penny.
• Ask: send the owner a short, batched list of questions about anything unclear, instead of a drip of messages all month.
• Review: look for odd balances, missing bills, duplicated entries and expenses in the wrong period.
• Close and report: lock the month and deliver a profit and loss statement, a balance sheet and a cash summary.

Reconciliation is what makes the numbers trustworthy

If you remember one bookkeeping term, make it reconciliation. It means proving that the balance in your books matches the balance on an outside statement, and explaining every difference. Without it, a report is just a list of transactions someone hopes is complete.

Here's a hypothetical example. Say the bank statement shows $48,210 at month end, but the books show $47,860. The $350 gap has to be explained. Perhaps a $300 customer payment was deposited but never recorded, and a $50 bank fee was missed. Once both are entered, the balances agree and the month can close. If the gap had been ignored, revenue would be understated and the fee would quietly disappear.

Reconciliation also catches problems that have nothing to do with accounting: a vendor charging twice, a subscription nobody cancelled, a refund that never arrived. Those finds often pay for the effort on their own.

What a bookkeeper usually doesn't do

Clear boundaries prevent expensive misunderstandings. A bookkeeper keeps the record and reports on it. Several related jobs belong to other professionals, and it's worth knowing who does what before you need them.

None of this makes the bookkeeper less useful to those professionals. A tax preparer working from reconciled books and a clear year-end package can spend their time on tax questions rather than reconstructing the year. The bookkeeper's job is to hand over a record someone else can rely on.

• Prepare or file tax returns, or give tax advice. That is the work of a licensed CPA or enrolled agent.
• Audit, review or attest to financial statements. Only a licensed CPA firm can do that.
• Give legal advice on contracts, entity structure or employment. That needs an attorney.
• Approve payments or make business decisions on your behalf. You keep that authority.
• Build forecasts and long-range strategy. That usually sits with a CFO or FP&A function, which relies on clean books to start from.

What you bring to the relationship

Bookkeeping is a collaboration. The bookkeeper can't know that a $2,400 payment was a deposit on new equipment rather than a repair unless someone says so. Owners who answer the monthly questions promptly and keep receipts for larger purchases get cleaner books faster.

You also need to give access in a sensible way. Read-only access to bank accounts is usually enough for bookkeeping, and sensitive documents should travel through a secure portal, not email. Expect to spend a little time each month reviewing the reports and asking about anything that surprises you. That review is where the value shows up.

If you would rather hand off the monthly close entirely, Sumday offers monthly bookkeeping with reconciled accounts and reports each month.