How to know if your bookkeeper is doing their job
When trying to understand what their bookkeeper or accountant is doing with the company’s books, business owners can feel like they’re staring into a big black hole. Follow these key tips to shed some light on what your bookkeeper is really doing and if it’s what your business actually needs.
Cash flow: Know how money comes in and goes out
One of a bookkeeper’s most basic functions is to pay your company’s vendor bills and to invoice and collect payment from your customers. For vendor payments, your two best reporting tools are an accounts payable aging (AP aging) report and a payment register.
The AP aging report lists all of the bills from your vendors, with their payment due dates. Ideally, you’re paying your vendors on time, which is typically within 30 days. A payment register includes details on the vendor payments that you’ve already made, so you can see what, where, and when cash went out.
Often more importantly, nonretail business owners need to know about their sales and customer collections. Sales reporting can show you when and how much you invoiced each customer. An accounts receivable (AR) aging report then shows you which invoices haven’t yet been collected and if any customer payments are overdue.
You may want to review these reports as often as weekly to ensure they’re always current.
Review your bank activity
One of the easiest ways to get a glimpse into your accounting is to review your bank activity, using your online account to see what payments are coming in and going out. As a general rule, your cash balance according to the bank should be the same or higher than what it is in your accounting software, because there may be checks that haven’t yet cleared.
If your bookkeeper says that your cash balance is higher than the bank is saying, it’s time to ask some questions! A monthly bank reconciliation report might help to bring you the answers you need. This report can be completed within one or two days of the month’s end, and it’s absolutely the best way to know that the cash on your books is correct.
Request accurate, up-to-date bookkeeping reports
If your bookkeeper is keeping your books in good shape, they should be sending you either monthly or quarterly financial reports, usually within 30-45 days of the end of the period. Even if you don’t fully understand financial statements, you should be able to review key items to see if they make sense. Are your sales numbers what you were expecting? Do key expenses like the cost of sales and salaries look reasonable? Does your cash balance look correct?
If you’re receiving and reviewing these reports regularly, you can compare each month’s numbers and gradually understand what they mean for your business. Requiring regular reporting from your bookkeeper will also help ensure that they’re continuously updating your books.
Meet with your bookkeeper regularly
One of best ways to know if your bookkeeper is doing their job is to meet with them on a regular basis. Don’t be afraid to ask questions! You should expect that your bookkeeper or accountant knows more about the details of your books than you do, and it’s their job to provide the information you need.
At Syzygy, we meet with our clients at least monthly, but often more frequently, to review relevant reporting and give owners an opportunity to update us on their business, ask questions, and develop strategy.