Bookkeepers help keep your finances in order, allowing you to make informed decisions to grow your business. They perform a long list of duties that provide financial clarity while also freeing up your time to focus on the core functions of your business. But, can a bookkeeper prepare financial statements? There is often some confusion regarding exactly what bookkeepers can and can’t do, including the preparation of financial statements. Although a bookkeeper can prepare financial statements, there are limits on what they do once the statements are complete.
Bookkeepers And Financial Statements
A bookkeeper is qualified to prepare your financial statements. However, they cannot prepare audited financial statements. The difference between a financial statement and an audited financial statement is that the audited financial statement is certified by a CPA, stating all the information is correct. Public companies must ensure a CPA audits the financial statements shared with the public.
So, although both types of statements record financial information, only the audited statement is certified as accurate. That said, a bookkeeper’s job is to accurately record your financial data, including your sales and income, expenses, payments, asset purchases, loans, lease payments, and investments.
What Are Bookkeeper Financial Statements?
Financial statement bookkeeping tends to focus on three types of statements:
1. Balance sheet: The balance sheet lists your liabilities and assets.
2. Income statement: Also known as a profit-loss statement, your income statement helps track your profitability. It provides details on the revenue gained from your products and services and the expenses needed to produce that revenue. Some companies also produce a statement of comprehensive income based on unrealized gains and losses for things such as foreign currency adjustments or investments.
3. Cash flow statement: Cash flow statements show you exactly how much money flows in and out of your company.
Your bookkeeper can help you prepare these financial statements and keep them up-to-date and accurate.
How Can You Ensure Your Financial Statements Are Accurate?
There are several ways you can help ensure your financial statements are accurate, including:
- Automate your accounting: Automation modernizes your processes making everything easier, including your accounting and bookkeeping. Everything exists in one place, including all your receipts for business expenses, payroll, invoicing, etc. You can also digitize receipts by scanning them into the system so you maintain accurate records and reduce the risk of lost paperwork. Calculations are also automated, helping ensure all your numbers will align with the information provided.
- Organize receipts: Make sure you have a process to collect and organize receipts from everyone in the business. You can hand them over to your bookkeeper so they can enter them, scan them into the system and always have a traceable record available.
- Have a reconciliation process: The devil is in the details, and every penny counts. To improve accuracy, you must reconcile information to spot discrepancies and track them down to make adjustments. Reviewing and reconciling your books with your accounts allows you to find mistakes before they cause bigger problems related to issues such as miscalculating your cash flow.
- Keep financial data backed up: Regularly backing up records ensures you always have access to crucial financial information, whether it is expense receipts, payroll hours, or contracts. Your automated accounting system can help with this step, but your bookkeeper should also ensure all records related to their entries should be backed up via scans and a secure data backup method.
- Avoid redundancy: The more people in your company with access to your accounts and financial information, the higher risk there is for redundancies, fraud, and errors. Limit who can access your financial information to make it difficult for records to be tampered with and misrepresented. Anyone with access should be limited to what they can access and how they can interact with the data using permission and role-based authorization. This reduces errors and duplications that can muck up the books.
- Employ a “second set of eyes”: Don’t let the buck stop at the bookkeeper. Ensure there is a second set of eyes to keep track of your finances. For example, a CPA-lead bookkeeper has the benefit of an accountant’s input, so you are less likely to experience major discrepancies.
- Improve timeliness: Reduce the time it takes for data to be recorded to help keep information fresh and ensure all claimed expenses have a receipt.
Accuracy really boils down to being organized with processes that maintain a continuous flow of financial management. A bookkeeper can help keep your financial management on track as your financial record-keeper.
What Else Does A Bookkeeper Do?
A bookkeeper records your business transactions and can manage other finance-related duties, including:
- Preparing interim financial statements
- Preparing accounts receivable and payable reports
- Preparing invoices
- Collecting payments
- Managing payroll
- Processing employee expenses
- Backing up your financial files
- Setting up and maintaining customer and vendor records
- Setting up recurring payments such as GST/HST installments, credit card payments, rent, etc.
- Preparing your records, so you are ready for tax remittance
- Reconciling monthly accounts
Why Are Financial Statements Important?
Financial statements allow you to review your company’s performance. As a result, you can create effective budgets, forecast sales, manage cash flow more effectively, and monitor KPIs to see if you are meeting your goals. They keep your management forward-thinking, providing data that helps them make important decisions that impact your sustainability.
For example, profit margins allow you to track profitability. If your profit margins are low, you can use your cash flow statement to track your spending and find opportunities to cut down on expenses. You also need financial statements when dealing with lenders and other entities who can help expand your business.
So, Can A Bookkeeper Prepare Financial Statements?
Financial statements can be prepared by a bookkeeper, providing the information you need to understand the cost of doing business. Your financial statements also tell you how effectively you generate revenue. Your bookkeeper plays an essential role in maintaining your financial information so it is always up to date and ready to review. As a result, you can manage your business more effectively.
Interested in speaking to our Intrepidium team to see how we can help your business? Call 778-800-7976 today or click here to schedule a consultation.