How to work with a bookkeeper: A business owner's guide to building a productive partnership

What is a bookkeeper?

Put simply, a bookkeeper is a service professional who maintains a business’s financial records. Bookkeeping methods have evolved over the past couple of decades, but the basic duties have remained the same.

A bookkeeper’s duties

Basic bookkeeping includes:

• Recording financial transactions using accounting software
• Bank and credit card statement reconciliation
• Preparation of financial statements for the business owner’s internal use

Some bookkeepers may provide additional services, such as:

• Payroll processing
• Customer billing (accounts receivable)
• Vendor bill payment (accounts payable)
• Budgeting
• Cash flow forecasting
• Technology consulting

A bookkeeper’s education

Many think bookkeepers fall into the category of data entry or administrative clerks when in reality, bookkeepers are typically financial service professionals.

Although bookkeepers do not have accounting degrees, most bookkeepers, especially those in private practice, have years of on-the-job experience in bookkeeping and accounting. Many have completed college-level accounting courses, often holding an associate degree (or the equivalent) in accounting or business. Additionally, most bookkeepers in private practice invest significant time and money in training to obtain certifications, licenses, and continuing education.

Just as a physician’s assistant can sometimes stand in for a doctor or a paralegal handles the legwork to help ensure an attorney is well-prepared, a qualified bookkeeper assists your accountant in much the same way. Many help behind the scenes, so accounting professionals can focus on the high-level work for your business.

Now that we better understand the basics of what a bookkeeper does and where they learn their trade, let’s cover some of the reasons why a company might hire one.

What are the benefits of working with a bookkeeper?

Many business owners believe they can handle the bookkeeping themselves and to an extent, they are correct. In a business’s early days,  owners must be intimately familiar with the  day-to-day financial operations. This level of knowledge serves the business owner well when they are ready to delegate the bookkeeping process to someone else.

But even the do-it-yourself business owner can benefit from consulting with a bookkeeping professional. Beyond number crunching, this type of professional can l make sure your bookkeeping software is set up correctly and that you are using it effectively. Some may also provide routine oversight to ensure your company’s books are accurately maintained and in good order.

Even if your bookkeeping software uses automation, rules, and other artificial intelligence, a human bookkeeper who has accounting knowledge is the guide that ensures everything flows into the software as it should.

So, if a business owner can do their own bookkeeping, why would they sacrifice a portion of their profits to hire a bookkeeper?

Reasons to hire a bookkeeper

Business owners typically hire bookkeeping professionals for a handful of different reasons:

• The business owner doesn’t have time to do the bookkeeping. Even with all the automation built into today’s accounting software, good bookkeeping takes time. True, it might only take an hour or so a week for you to do your bookkeeping, but that’s an hour you aren’t spending doing things like growing sales or making efforts to improve the work-life balance of your company’s employees. There’s an opportunity cost to doing the bookkeeping yourself (which may only increase as your business grows).

• The business owner doesn’t want to do the bookkeeping. In many cases, it takes a certain type of person to do this work. If you enjoy reconciling bank and credit card accounts and preparing financial statements, then it’s probably right up your alley. But typically the type of person who enjoys this sort of work is a professional bookkeeper and not the owner of the business. If you don’t love managing the bookkeeping, hire a bookkeeper and spend your time doing the things you do love.

• The business owner doesn’t know how to do bookkeeping. The reality is that there’s more to bookkeeping than data entry. Correctly categorizing information and validating a set of books requires a specific skill set – one that you, as a business owner, might not possess (or have the patience) to learn. Once your business grows beyond a few sales and expenses each month, it could be worth passing the “bookkeeping torch” to a professional who lives and breathes numbers.

Can a bookkeeper save me money?

In a word, yes. A bookkeeper — even if you are investing several hundred (or even several thousand) dollars per month —  can save you money. How? Let’s look at some of the ways that a bookkeeper  can have an impact on a company’s bottom line.

• Fraud prevention and detection. A good bookkeeper can help you put checks and balances in place to protect your business from fraud, both from employees and bad actors outside of your organization. Additionally, bookkeepers are often the first to come across unauthorized activity when a credit or debit card has been compromised.

• Prevent duplicate payments. Whether it’s due to an error or a simple timing issue, a vendor might send a reminder for an invoice you’ve already taken care of. Your bookkeeper can establish procedures that help your business avoid double-paying vendor invoices.

• Make sure you get paid what you’re owed. Your bookkeeper probably won’t be able to contact customers about past due invoices (collections activity is regulated in most states), but they can alert you to customer invoices that remain unpaid after the due date passes so you can follow-up with the customer.

• Catch bank errors. Early in my career, a CPA told me, “The bank is always right.” He was wrong. It doesn’t happen often, but occasionally banks make errors, and — in my experience — the errors are rarely in the favor of the business owner. An attentive bookkeeper will catch these slip-ups so that they can be addressed.

• Save money on taxes (and interest and penalties). Your bookkeeper won’t prepare your tax return, but they will be instrumental in ensuring you pay the right amount of taxes. From correctly entering transactions so that a tax preparer can claim all of the appropriate deductions, to providing financial statements so you can determine your estimated quarterly tax liability, a bookkeeper will save you money not only on taxes, but also on the interest and penalties the IRS assesses when errors are made.

These are just a few of the ways a professional bookkeeper can be a money-saving investment in your business.

Are there disadvantages to working with a bookkeeper?

As a bookkeeper myself, I’ll admit to being biased. However, I can only think of one disadvantage to working with a bookkeeper, and it’s this:

By not doing the bookkeeping yourself, you will lose some intimate knowledge of your business’s finances.

When you manage your own bookkeeping, you know every transaction that occurs in your business. Some of this intimacy falls to the wayside when delegating the bookkeeping, but never fear: A great bookkeeper will ensure you have the clarity needed to run your business without getting bogged down with the details.

How do I find a bookkeeper who wants to help my business?

One of the best ways to find a bookkeeper for your business is to ask for a referral. Fellow business owners, your accountant or other tax professional, and even your college’s business school are great places to start your search for a bookkeeper. There are also “finder” sites that can help you find a bookkeeper who has expertise in your industry.

No matter where you search, it’s important to keep in mind (and one of the first things we pointed out at the beginning of this article) is that bookkeepers aren’t “one size fits all.” In addition to their industry expertise, each bookkeeper offers different services. So, what services should you expect from a bookkeeping professional?

What are the top five skills that make a great bookkeeper?

Your bookkeeping professional can be instrumental to the financial success of your business, so you want to choose someone with the skills that matter most. The top five skills that make a great bookkeeper are:

• Attention to detail. As the person responsible for recording your financial data — or making sure automation records it correctly — your bookkeeper must have excellent attention to detail. Make sure to choose a provider with systems and processes to ensure nothing slips through the cracks. And if something does? They should have a safety net to help them catch it.

• Proactive communication. It can be tough to find a bookkeeper with this critical skill. Many bookkeepers subscribe to the “no news is good news” approach to communication, and they will only reach out if they need information from you or if there is a problem. This isn’t the sort of bookkeeper you want to work with.When you vet bookkeeping professionals for your business, ask how they communicate with their clients and how often that communication occurs. Choose a provider who offers a policy that includes a specific response time for emails and phone calls, the number of scheduled conversations you’ll have access to, and a method for keeping you updated during the onboarding process and at other key points of the relationship.

• Flexibility AND boundaries. A bookkeeping professional with no boundaries will quickly become overwhelmed with client requests and will not be able to provide the level of service you expect. But you also don’t want to work with a provider who is so married to their processes and procedures that they cannot — or will not — accommodate reasonable requests you may have. Find a bookkeeper who offers a good balance of flexibility and boundaries.

• Creativity. No, this isn’t to say that I advocate hiring a bookkeeper who will get creative with your numbers. But you do want a bookkeeper who can think outside of the box to provide you with solutions to your business’s unique challenges. This can include presenting information in a way that makes sense to you, designing solutions that will help them do their work better while respecting your established workflows, and troubleshooting if something goes wrong.

• Willingness to learn. A great bookkeeping professional is a lifelong learner. Business is constantly changing, and you want someone who invests in ongoing education. Don’t be upset if your bookkeeper often travels for conferences or turns on their email autoresponder to take part in virtual training events. Be concerned if they DON’T invest in continuously developing their knowledge and skills.

Can low-quality bookkeeping affect your bottom line?

Some bookkeepers would have you believe that bad bookkeeping can sink your business. Although bad bookkeeping has led to the occasional business failure, the consequences are usually not quite so dire.

Bad bookkeeping can still have serious consequences, though, including:

• Paying too much (or too little) in taxes. You pay taxes on your business’s profits. If your profit is overstated — which can happen if your expenses aren’t properly accounted for or if you have duplicate income entries — then you will pay too much. If your profit is understated —which can happen if your income isn’t correctly captured or if expenses are duplicated — then you will pay too little. When you pay too little in taxes, you could incur interest and penalties on the underpaid tax liability. Pay too much, and you’ve just given the government an interest-free loan. Good bookkeeping helps your tax professional complete your tax return correctly, which in turn ensures you don’t overpay or underpay your taxes.

• Inability to get financing or investors. Banks and investors don’t care as much about your business’s checking account balances as you might expect. They want to see financial statements.If your bookkeeping is not done correctly, your loan request could be denied, or you could miss out on a favorable rate.  Investors want to see clean financial statements before committing money to your business.Beyond business financing, as a business owner your business’s financial statements will be taken into consideration if you apply for a personal loan for a vehicle, mortgage, or even college tuition. Don’t put your financial future at the mercy of bad bookkeeping.

• Inability to get the information you need to run your business. As your business grows, you will begin to rely more on your financial statements to make strategic decisions. Bad bookkeeping could lead you and any consultants you engage to make incorrect assumptions, costing your business time and money.

Will bad bookkeeping cause your business to fail? Though unlikely, there’s still a lot riding on the accuracy of your bookkeeping. It’s best to invest in a professional who can ensure things are done correctly.

What tools do bookkeepers use?

Most bookkeepers have a preferred set of tools they rely upon. Your bookkeeper will likely refer to this as their “tech stack.”

It’s unlikely you will encounter any two bookkeepers who use the exact same tech stack, but almost every bookkeeping professional will have at least one tool they use in each of the following categories:

• Document portals. Do you want to see a bookkeeper go pale? Send them sensitive information via email. Especially now that the FTC has cracked down on information security, your bookkeeping professional likely has a document portal they will ask you to use to send and receive personally identifiable information (think bank statements, payroll information, financial statements, etc). Some popular document portals include ShareFile, SmartVault, and Canopy.
• Communications portals. Your bookkeeper wants to stay in touch with you, and they understand that business owners have different methods of communication they prefer. At the same time, bookkeepers  need to maintain their own sanity.  Having some clients who text , while others email or use Slack, and still others who prefer to call can quickly lead to being overwhelmed.Enter the communications portal. Communications portals serve as a “hub” for communications, giving you the feel of a text message, email, or Slack message, but all managed in one place by the bookkeeper. Your bookkeeping professional might even use your communications portal as the “starting point” for all things relating to your bookkeeping, giving you one place to go for all your financial information. Some popular communications portals include ClientHub and Liscio. These two communications portals also serve as document portals, providing two services in one.
• General ledger software. The general ledger software your bookkeeper uses will likely be one of the “non-negotiables” in your relationship. Even though all general ledger software does basically the same thing, the feel and workflow between software programs is different enough that most bookkeepers will insist you use the one (sometimes two) they prefer. What is general ledger software? Tools such as QuickBooks Online, Xero, Zoho Books. Any double-entry “accounting software” on the market falls under the category of general ledger software.
• Payroll software or provider. Some bookkeepers manage payroll themselves, while others will want you to be involved in the process. Whichever method your bookkeeping professional favors, they will use payroll software or a payroll provider like OnPay to make sure your payroll is always accurate and on time.