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Bookkeeping is the practice of keeping records of business transactions in journals and ledgers. The ledgers and journals serve as records for the business to go back and inspect their expenses anytime they need to. There are multiple reasons why you would want your business to go back into time and read from ledger, and some of the more common reasons include calculating income tax, forecasting expenses, and breaking down segments. Different tools are used for the purpose of bookkeeping and the most common one is Intuit’s Quickbooks. Quickbooks allows accountants or “bookkeepers” to seamlessly record ledgers and share the numbers with the company’s designated department. Bookkeeping makes filing your income taxes quicker, because you already have a broken down earnings and expense report in your hands.

According to “History of Bookkeeping and Accounting” by Preston E. Curry, the first records of bookkeeping throughout time include that of communities that needed to hold records for taxation and contributions. As Preston E. Curry explains, it is therefore quite difficult to pinpoint the exact time when bookkeeping originated. “The first nations of which we have any authentic records that developed commercially were Babylon, Assyria, and Egypt.”, as mentioned by Preston E. Curry. From these explanations, it is then important to note that bookkeeping happens wherever transactions occur. Like the Babylonians once did when commercializing their city, nowadays we still deem it of utmost importance to keep records of our business and personal transactions.

It is also worth noting the importance of bookkeeping when it comes to “management officials, investors, and credit grantors.”, as Britannica points out in their “bookkeeping” definition page. Here at America Tax and Accounting we can personally how this is of relevance. Think about it, if you were about to invest in an enterprise, wouldn’t you like to know what, where, how why, and when the enterprise you’re about to invest money on spends their capital. Britannica goes on to explain that getting an insight on a company’s books gives the investors insight into “the results of operations, [and helps them] to control costs, to budget for the future, and to make financial policy decisions;” .

Hopefully this has helped you gain an understanding of how beneficial it is for your company to keep a clean track record of expenses in order to gain a better outlook when dealing with investors. An investor would like to see that your bookkeeping records are producing profit, and that you know exactly where each of your pennies are going. This will help the investors gain a better understanding of your financial decisions.

This following video by "The Bookkeeping Channel" will help you understand the importance of hiring a bookkeeper. You will learn "what bookkeeping is, what they do on a day-to-day basis, and why bookkeeping is more important to the success of a business than you might think."

How often does a bookkeeper update your ledgers and journals?

Depending on the amount of transactions your business runs through on a daily basis will determine how often your bookkeeper ends up updating your ledgers. For example, if your business is making 10 bank transactions a day, it is definitely a great idea to update your ledgers on a daily basis. Now if you are making a transaction every 2 or 3 days, you will definitely want to consider updating your books weekly instead of every day or twice a week. As Nimrah Abdullah explains it in her article “How Often Should I Update My Bookkeeping Records?”, the more precise answer to the question of how often you should be updating your books is “as often as you need to keep everything in check and running smoothly.”

There are benefits to updating your books on a regular basis as Nimrah Abdullah explains, and that is that you will gain “Better Business Decisions, Financial Health Snapshot, Reduce[d] errors, and Sav[ing] Time in the Long Term.“ When you have a business, knowing exactly what you can spend or not makes a difference. If you have enough capital to invest in a new feature for example, you will be opening up your chances for profiting later down the road. If as a business owner you have no insight as to how much you can spend, you will be putting yourself at risk because you might not have enough for upcoming bills. A financial Health Snapshot, as Nimrah Abdullah puts it, is the current state of your company’s finances. If you look at your company’s financial state, you know what you will be needing tomorrow. Knowing that you have enough for the 3 payments coming up this month will put your mind at ease. Such is the importance of knowing your company’s financial health state.

Take a peek at this video by "Tax and Accounting Coach" to understand how often you should be updating your company's ledger.

How does a bookkeeper track ledgers and journals?

In the present day, a bookkeeper tracks his journals by using software. Quickbooks, Xero, Freshbooks, Wave, Zoho Books, and LedgerSMB. Each of the software offers a different tool set to compete with one another. However, all these softwares offer the ability to track your businesses' transactions. Software like Wave offer "unlimited jobs and bill clients from anywhere.". Other software like ZipBooks allows you to "Manager big client or vendor lists and accept PayPak payments." If you want to take a look at a full list of free accounting software for small businesses you can checkout this article by UsChamber.com, "10 Free Accounting Tools for Your Small Business"

Bookkeepers input the business transactions into the accounting software whenever they need to update the business's ledger. Like we discussed earlier, the business ledger can be updated daily, weekly, or monthly; depending on how many transactions your business frequents and how much financial guidance the ledger is providing for the business on a daily basis. The accounting software bookkeepers use offer multiple features. One said feature an accounting software offers is called "bank reconciliation". Bank reconciliation allows your ledger to align with your bank statement by checking for discrepancies. One feature offered by accounting software is automated bank reconciliation. Automatic Bank Reconciliation allows the software to synchronize the ledger automatically with your bank account if necessary, or simply checking all expenses and incomes line up with the ledger.

You can take a look at this video below to see how bookkeeping software works. In this video by Stewart Gold you will get to learn how the Quickbooks software differs from the Xero software. Additionally, you will get to see what bookkeeping software offers in an overall scale. From there you will experience how a bookkeeper tracks a business ledger.

Why is a bookkeeper required?