Hello! I know, I need to post more often but as a business owner life just gets so darn busy! But here I am near the end of February trying to stay dry. That’s right, dry. Not warm, dry. There is so much rain here in London, Ontario that roads are closed due to flooding.

So I wanted to talk today about who’s doing your bookkeeping. First, if you are doing your own bookkeeping, that’s another topic and we need to talk. But if you outsource your bookkeeping as you should be, do you really know who is doing your bookkeeping? What are their qualifications? What their experience is? What level of bookkeeping are they maintaining?

Let’s start with qualifications as it is the biggie. There is a significant difference between a full cycle bookkeeper and someone who does data entry. A full cycle bookkeeper can be a business owner’s best friend. This person has either an accounting/bookkeeping diploma (or certificate) and perhaps some sort of certification or designation as a professional bookkeeper. Be careful not to confuse this with an accountant, who has earned their CPA designation, is part of a regulated industry and is a highly educated professional. The full cycle bookkeeper has knowledge of the complete bookkeeping cycle from A/R and A/P to payroll, reconciliation of bank accounts and sub ledgers, adjusting entries, amortization schedules and more. This person understands the consequences of each and every entry they enter in to the accounting software. They understand how each debit and credit affects either the balance sheet or the income statement. This is important stuff. Because of this level of understanding, troubleshooting, or what I like to call Forensic Accounting, is a breeze (so to speak). In addition, if done properly, it makes things easier for the accountant at year end (which they love) and in fact may save you some hard earned dollars when your accountant’s bill comes in. Generally, a data enter-er is someone who is concerned with A/P and A/R; in other words, making sure your invoices (sales) are entered and your expenses are recorded somewhere. They have little knowledge of the inner workings of the books and how to read and understand your balance sheet and income statement let alone be able to detect errors. These things are kind of important. How do you know if the person you hire is a full cycle bookkeeper or a data enter-er? While the full cycle bookkeeper has the above mentioned accreditation’s, the data enter-er may have learned how to use the accounting software at a previous job or took a quick course on how to use the software. That full understanding isn’t there. Disclaimer: Of course like everything, there are exceptions to every rule and this is no different. There will be fully trained bookkeepers out there who do not perform at this level and there are untrained bookkeepers who may have more understanding than what I have described here.

What about experience? The only point I really want to make here is this: a good bookkeeper should have several years experience, preferably with public accounting, before they decide to venture out on their own. Jumping right into being a bookkeeping solopreneur is unwise until there is some real world experience.

Lastly, how much of the books is your bookkeeper keeping? Sounds like a tongue twister. Are they just concerned about income and expenses or are they cognizant of things like bank reconciliations and ensuring that the balance sheet makes sense and is correct? The more they do, the easier it is for your accountant and that is never a bad thing.

So, who’s doing your bookkeeping?