Bookkeeping is a large component of the finance and accounting department of a business. What Does a Bookkeeper Do? Primarily, bookkeepers are responsible for managing and recording the day-to-day financial transactions of the business; ensuring accounts and records are accurate and complete. Financial transactions include operational expenses, sales, earned revenue, payroll, payment of taxes, earned interest, loans and investments.
A bookkeeper’s role may vary depending on the size and nature of the company. Smaller companies that do not employ an accountant, require more extensive duties from a bookkeeper. At minimum, the bookkeeper is responsible for processing the paperwork for a company’s transactions. This entails getting the information quickly and accurately recorded in the company’s general ledger accounts. Also, bookkeepers provide full back-office support. For instance, processing invoices, paying bills, managing cash, billing and following up on accounts receivable, reconciling account balances, adjusting entries, and processing payroll.
Bookkeepers record the company’s activities in financial statements which display the financial performance of the company. The statements focus on specific parts of a company’s financial activities, such as cash flow, assets or earned revenue and connected expenses. Some small business bookkeepers use paper ledgers and journals to record financial transactions. However, most businesses prefer their bookkeeping be a cloud-based program or system. Bookkeeping and accounting software simplify record keeping while being more cost efficient and making it possible for small businesses with little staff or resources to build and maintain comprehensive bookkeeping systems.
Consultance Accounting leverages exceptional talent, proven processes, and top technology platforms to deliver timely and accurate financial solutions that help small and medium-sized organizations improve productivity, increase profitability, and achieve their goals.
Do you do your own bookkeeping or have another non-accountant employee tackle this as “other duties as assigned”? I find that non-accountants often struggle when recording payroll-related entries. Challenges may occur even if you use an outside payroll service, since someone still needs to record the payroll entries in your accounting records in an accurate and timely manner. Here are some areas to consider to help you avoid common payroll accounting mistakes:
Start With Your Chart of Accounts Set Up
To facilitate proper payroll accounting, make sure you’ve set up your Chart of Accounts correctly in the first place. Entries involve recording your payroll-related costs and the related liabilities owed to others, such as the IRS and health insurance providers. To illustrate, below is a simplified version of what your payroll accounting entry might look like:
Debit: Gross Wage Expense* $5,000 Credit: Federal Withholding $500 Credit: FICA Payable $750 Credit: State Withholding $250 Credit: Employee Health Insurance $500 Credit: Cash $3,000
*Note: If you desire, you can break down Gross Wage Expense even further to distinguish between any key staffing groups in your business/organization, such as professional versus administrative staff expenses.
Create Efficiencies in Your Accounting System
Human errors often occur when manually inputting data into your accounting system. To save you or your staff time and help avoid errors due to inconsistent processing, take advantage of features in your system that allow you to set up memorized transactions for recurring accounting transactions. You’ll still have to update your payroll journal entry for the appropriate payroll dates and amounts for that pay period, but the general accounts used will be automatically stored and easy to use each time.
Check for Negative Balances in Your Payroll Liabilities Accounts
To check for payroll mistakes, generate a balance sheet report for the month from your accounting system. If you pay your PR taxes when required, then the liability accounts generally should be zeroing out on a monthly basis. If you find they’re not, you’ll have to do further research to understand why; it’s possible that a mistake has been made that requires fixing.
Perform a Quarterly Analytical Review
In addition to checking for negative balances, I recommend performing a quarterly review of your payroll activity to identify potential issues so they can be addressed promptly. This involves generating a profit-and-loss statement at the end of each quarter, which shows your payroll expenses (as well as other expenses) for each month in the quarter. Review the data for any unusual inconsistencies. For example, if your Gross Wage Expense shows significant variances across each month, but your staffing levels and salary amounts have not changed and there is no other logical explanation, it’s possible your payroll accounting entries were entered incorrectly.
Understand Payroll Filing Requirements
Even if you use a payroll service to manage your payroll process, you should still understand what forms are required to be filed with the federal, state, and local authorities and when they are due, since you have primary responsibility for compliance. Federal forms include your IRS Forms 941, 940, W-2, and W-3. For more information, go to https://www.irs.gov/businesses/small-businesses-self-employed/employment-tax-due-dates. You should also consult your state and local authorities for other filing requirements.
For more info on how to optimize your payroll process, see my article.
How Consultance Accounting Can Help
As a virtual accounting firm who performs outsourced accounting services for small- and medium-sized business and not-for-profit organizations and associations, Consultance Accounting can perform your bookkeeping and accounting services, to include processing, recording, and reconciling your Payroll. I’ll be happy to talk with you about ways to address your improve your practice. Orin Schepps, Founder and CEO @consultanceaccounting https://www.consultancellc.com
1. Accounts receivable/collections
2. Cash flow
3. Managing paperwork
4. Closing the books each month
5. Managing payroll
If you’re feeling the same pain, here’s some strategies to help get over these accounting hurdles:
Accounts receivable: Review your AR aging reports monthly and follow up promptly on delinquent accounts. Strive for automated payments in order to streamline your collections process. If customers, clients, and/or members are still paying you with paper checks, focus on changing their payment method to e-Payments.
Cash Flow: In addition to the enhancing your collection process, you can improve your cash flow by reviewing your inventory levels to see if you are carrying more inventory than you need, based on your sales volumes. By understanding your sales patterns, you can become more cost effective with the timing and volume of your inventory purchases, possible freeing up precious cash for other uses. Also, review your financing terms for any notes payable and other long-term obligations you have. There may be opportunities to renegotiate a better interest rate through loan consolidation. The same goes for your interest-bearing CD and checking accounts; review your rates and see if there are opportunities for better terms. Lastly, improve your cash flow by analyzing your expenses; see Review These 6 Expenses To Impact Your Bottom Line for more information.
Managing paperwork: Consider using Hubdoc, a document management app, and Bill.com, an automated bill pay solution, to streamline your paperwork. Hubdoc automatically “fetches” your online bills and bank statements and Bill.com automates how you pay vendors and invoice customers/clients. Your paperwork is stored securely in a cloud-based repository, which you can easily access, even when you’re on the go. These two apps can sync with your accounting system, to eliminate the need for duplicative data entry.
Closing the books each month: Ensure you have a good handle of what a solid closing process entails and institute standard operating procedures to ensure nothing slips through the cracks. See http://intuit.me/2zuQSNw for a good article on the accounting tasks every small business should consider.
Managing payroll: Strongly consider using an third-party service handle your payroll, since this core process can be painstakingly tedious, complex, and cause major issues if not done right. There are several reputable payroll service providers in the marketplace; including Intuit’s payroll solution, which seamlessly integrates with QuickBooks Online. SeeOptimizing Your Payroll Process for more on this subject.
Benefits of Using an Outsourced CFO or Controller: The survey results are not surprising, given that most of the small businesses surveyed don’t have a CFO or controller. According to the report, only 25% of smaller companies (with 11-25 employees), had a CFO or controller.
Most of the above pains can be eliminated by hiring the right accounting expert. Small businesses and not-for-profits should consider the benefits of outsourcing all or parts of their accounting functions to a reputable outsourced accounting firm. These firms can provide a full range of services without you having to provide physical office space and invest in other employee-related overhead costs. This is especially helpful if the volume of your business fluctuates; with an outsourced firm, you don’t have to worry about staffing up and down as changes occur. You’ll free up your time normally spent on bookkeeping tasks so that you can focus on things more profitable aspects of your business. And, you’ll gain resources for your business to draw on that may otherwise have been unavailable to you, such as certified professionals in the most up-to-date technology and accounting standards. By outsourcing your accounting function, you’ll still maintain full control of and access to your information, while the firm addresses all of your accounting needs. Truly the best of both worlds!
How Consultance Accounting can help:Consultance leverages exceptional talent, proven processes, and top technology platforms to deliver timely & accurate financial solutions that help small and medium-sized organizations improve productivity, increase profitability, and achieve their goals. We use cloud-based technologies that integrate with each other to streamline the process. Contact Us if you have questions and/or need more assistance.
Keep Your Payroll in Order and Your Employees Happy
If you’re like most companies, whether you’re a commercial business or a not for profit organization, employees are your most valued assets. In order to attract and retain a strong employee base, it’s important to get your Payroll process running right. Here are some tips to optimizing Payroll process:
Use a third party Payroll service provider: You may be doing Payroll in-house now using some type of software. However, as you grow, there are benefits to having a Payroll service provider do this work, since the process is often detailed and tedious, and can cause major issues if not done correctly. Outsourcing your payroll function saves you the cost of an internal staff person. Or, if you’re a smaller company, you may be doing this pain-staking process yourself; think of all the time you could free up to focus on growing your business.
There are several companies who specialize in providing full services for Payroll, including the processing of benefits, W-2’s and government tax filings. Since Payroll is their key competency, you can rely on their expertise and feel confident that they are using the most up-to-date software and tax tables. And, if you’re like many companies who worry about the security of your in-house technologies, you can gain peace of mind by outsourcing to a company with more state of the art security protocols. You can also minimize the likelihood of IRS penalties for late or inaccurate filings, since these professionals are experts at what they do, and can facilitate your proper compliance with the appropriate external authorities.
Click here for more info more info on Choosing a Payroll Service Provider: Pros and Cons
Streamline and enhance your Payroll process: To make your Payroll process run as effectively as possible, consider the following:
• Integrate with your Accounting system: Consider a payroll service that can integrates with your accounting system. For example, many small businesses who use QuickBooks Online also use its Payroll solution. This enables you to automatically update your books for Payroll-related activity, which eliminates the extra steps of having to import data files and do double data entry.
• Understand your People costs: People costs are often the largest line item expense on a company’s financial statements. Managing and accounting for this time is an important priority for successful businesses. If you aren’t currently allocating and tracking staff’s time spent on programs, customers, jobs, or other important categories relevant to your business, you are likely missing out on some important information. Consider implementing a time management system that integrates with your Payroll and Accounting systems. This enables you to see actionable information, and can inform your decisions about staffing and pricing strategies.
• Don’t forget about internal controls: Even if you outsource your Payroll process, you’re still responsible for ensuring strong internal controls for your organization. Therefore, when searching for payroll service providers, be prepared with specific questions that deal with access and security and disaster recovery controls. Once you choose a provider, make sure your contract addresses those areas. Encourage your employees to choose direct deposits, since paper checks are more vulnerable to fraudulent transactions. And, to prevent payroll errors, institute review steps in the process, such as management review and approval of time cards and changes to your payroll information (e.g., new employees, changes in salary, etc.).
How Consultance Accounting can help: As a virtual accounting firm who performs outsourced accounting services for small and medium-sized businesses, we can perform your bookkeeping and accounting services, to include processing, recording and reconciling your Payroll. We use cloud-based technologies that integrate with each other to streamline the process. This includes automating your time-tracking process, using Tsheets, and customizing it to your company’s specific needs and industry requirements. We can also set up mobile option, which provides flexibility for employees who are on the road. We’ll implement job costing and ensure your timekeeping system is integrated with your Payroll and accounting systems. We’ll show you to generate and interpret meaningful reports so that you can make better business decisions.
Contact Us if you have questions and/or need more assistance.
Consultance leverages exceptional talent, proven processes, and top technology platforms to deliver timely & accurate financial solutions that help small and medium-sized organizations improve productivity, increase profitability, optimizing payroll process, and achieve their goals.