Bookkeeping
Service description
Bookkeeping is the recording, organizing, and maintaining of a business's financial transactions. Bookkeeping does not involve the analysis, interpretation, and reporting of financial data, which falls within accounting services. Bookkeeping is not Accounting, Tax Accounting, Financial Reporting, or Tax Preparation.
Common industries
Applies to every business that needs books, from sole proprietors to growing companies.
ROI
Clean books cut time and fees at tax season, surface problems early, and are essential for financing or a future sale.
Benefit
Accurate, up-to-date books — categorized transactions, reconciliations, and monthly financials — so you always know where the business stands.
Why get it
Tax returns, loan applications and any sale of the business all rest on the books. Federal law requires records that support what is reported, so gaps are costly to rebuild later.
When you benefit
Ongoing, with transactions recorded and reconciled monthly. One-time catch-up work is common when books have fallen behind.
What it costs
Typically a monthly fee.
When you pay
Bookkeepers usually charge a monthly fee set by transaction volume and the number of accounts to reconcile, or bill hourly. Catch-up work on past months is often quoted separately as a one-time project.
Other costs
An accounting software subscription, and payroll or receipt-capture add-ons if used. Cleanup of prior-year books may be charged as a separate project.
Risks to know
IRC §6001 and its regulations require taxpayers to keep records sufficient to show their income and deductions, so records that don't support a return can lead to disallowed items. Mixed personal and business spending, uncategorized transactions and unreconciled accounts make the books unreliable and costly to fix later.
When risks arise
Errors build up quietly month to month. They typically surface at tax time, when a lender or buyer reviews the books, or in an IRS examination years after the return was filed.
The process
The provider gets access to the accounts and software, sets up or cleans the chart of accounts, and records and categorizes transactions. Each month it reconciles accounts to bank and card statements, flags questions for the business, and delivers the month's financial reports.
Your commitment
The business gives access to its bank, card and payment accounts, shares receipts and invoices, and answers questions about unclear transactions promptly. It should keep personal and business spending separate and agree on how often records are reviewed.
Documents to gather
- Bank and credit card statements
- Receipts and vendor invoices
- Prior-year tax return and any existing books
- Payroll reports and loan statements
Helpful reading
- Understanding Double Entry in Accounting: A Guide to Usage — Investopedia
- Manage your finances — U.S. Small Business Administration
Further research
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