Controlling a business’s cash flow is one of a bookkeeper’s roles. From keeping the account records up-to-date to taking charge of analysing your financial data, a good bookkeeper knows that boosting the business’ cash flow is the key to having a stable and successful income.
Whether you are managing bookkeepers in your organisation or you are the one to undertake this role, there is a dire need to understand a bookkeeper’s crucial functions and the greater influence they have on your company’s cash flow.
Let’s discuss it further below.
Introduction: The Role of a Bookkeeper in Managing Cash Flow
Cash is of the essence for any business to thrive. Your organisation’s cash inflow and outflow are like fuel that keeps the engine moving. Therefore, keeping a healthy cash flow for your business is indispensable and necessary.
Bookkeepers are the backbone of your business as they provide substantial monetary information about the management of the company’s bottom line. They are like a financial doctor responsible for diagnosing and treating cash flow disorders, as well as preventing them. A healthy cash flow buffers your business against uncertainties, ensures smooth operations, boosts lenders’ and investors’ confidence, and paves the way for business growth.
Bookkeepers vs. Accountants: Understanding the Difference
You might be wondering what the point is of having both a bookkeeper and an accountant in your organisation. Well, these two professionals perform different duties, but they complement each other.
You need to use the bookkeepers’ and accountants’ expertise for your business to run well. Their labour division is significant.
Formation of the company
An accountant is useful when setting up your organisation. They aid in creating business plans and setting up a structure that best fits your business.
Accounting is a subjective role that offers monetary insights to you as a business owner. This information is based on the bookkeeper’s data.
Therefore, an accountant analyses a bookkeeper’s data into information to produce accounting reports.
Core responsibilities of a bookkeeper
On the other hand, bookkeeping is an administrative and transactional duty that involves handling the everyday chores of recording financial exchanges such as sales, receipts, purchases, and payments.
A bookkeeper’s core purpose is to generate company activity data.
The bookkeeper and accountant work together regularly, at least once a month, since the bookkeeper needs to explain decisions and numbers that are not clear to the accountant. This can be done remotely or in person.
The Crucial Tasks of a Bookkeeper in Cash Flow Management
Cash flow management is the tracking and monitoring the amount of money coming in and out of your business for proper forecasting of monetary obligations. It is the work of a bookkeeper to accurately track and control day-to-day cash flow.
With the help of a bookkeeper, your organisation’s cash flow stays positive while your workload as the owner reduces.
Here are some bookkeepers’ important tasks in managing cash flow.
1. Recording and tracking all financial transactions
Bookkeepers track payments and receivables accurately and group the transactions based on the correct division in the books.
Data entry, invoicing, paying bills, payroll, and tax return preparation are part of the bookkeeper’s primary tasks.
2. Reconciling bank statements and ensuring accurate records.
Bookkeepers ensure that internal records of finances match with the bank statements. This allows for discovering disparities arising from omitted invoices and calculation errors.
As a business owner, you can verify records before handing them to the taxation office.
It also helps monitor administrative chores and find loopholes, for instance, minimising any chances of bounced cheques that might have been sent to the vendors.
3. Producing monthly cash flow statements.
A cash flow statement (CFS) is a financial statement that complements the income statement and the balance sheet.
A bookkeeper’s primary role is to prepare a CFS monthly. These summarise cash flow and show whether the cash coming in and out of the company is equal or has the same amount.
- Cash from operating activities: payments (rent, interest, income tax, suppliers, salary, and wages) and receipts from sales of commodities
- Cash from investing activities: sales or purchases of assets, payments from mergers and acquisitions, and loans
- Cash from financing activities: loan repayments, dividends, stock repurchasing
Enhancing Cash Flow with an Expert Bookkeeper
Accurate bookkeeping is crucial to your business, whether you hire an expert or choose to do the work yourself.
A bookkeeper will help boost your business in the following ways:
- They help identify anomalies and discrepancies in advance.
Not having suitable bookkeeping, you run the risk of having inaccurate accounts. Also, your accountant will not have a clear picture of your business’ finances.
- Ensuring compliance and accuracy in financial reporting.
You need an accredited bookkeeper to help you meet legal obligations to accurately file the business reports to the tax office and record the company’s accounts.
- Leveraging bookkeeper’s insights for budgeting and forecasting.
Cash flow forecast is a significant aspect of your business’s financial planning.
With a bookkeeper in your organisation, you can get up-to-date financial forecasts, which will help make informed decisions concerning debt repayment approaches and investments.
With bookkeepers’ insights on comprehensive cash flow budgeting and forecasting, you will be able to identify potential shortages of finances before they happen and plan accordingly.
For any business, knowing how much is spent and received is key. Balancing the books for budgeting and forecasting is essential for bookkeeping. Although it is a section in the accounting department, bookkeeping differs from accounting. It is objective and manages real situations and observations to provide data. In contrast, accounting uses the data to make up-to-date decisions and strategies.
A bookkeeper plays a vital role in your business’s cash flow management. To keep track of your company’s finances, debts, investments, incomes, and expenses, make sure to engage a fully qualified bookkeeper.
By understanding your cash flow, you can identify cash shortages in advance, manage payments, and be prepared for unexpected expenses. Save time and money by using a fully trained bookkeeper.