What does a bookkeeper do? More than you might realize. They can handle many of the daily, monthly and year-end financial tasks you may be tempted to put off. Following is just a sample of what a bookkeeper can do for you:
- Identify potential savings you never knew about
- Track outstanding invoices and collect payments
- Keep your cash flow records up to date
- Identify any filings that require an IRS Enrolled Agent or CPA
- Track deadlines for your retirement plan contributions and tax filings
- Categorize your expenses correctly so you have clean books at tax time
- Identify suspicious transactions in your bank, credit card and loan accounts
- Reconcile your accounts and close your books each month
- File sales taxes and monthly B&O gross receipts taxes required by Washington State
- Process payroll, including Labor & Industries (L&I) requirements for the state of Washington and PFML (Paid Family Medical Leave) deductions
- Prepare your financial records for your tax preparer/CPA
- Reduce your risk of IRS issues and help you plan for the next year
What a Bookkeeper Can Do for Your Small Business
Bookkeepers record and organize every financial transaction your business makes and prepare your books for tax filing. That includes all of the following tasks:
Daily: logging income, expenses and bank activity
Monthly: reconciling accounts and closing your books
Year-end: cleaning up your financial statements before giving them to your CPA/tax preparer
Bookkeeper vs Accountant vs CPA: Different Duties
Bookkeepers, accountants and CPAs have different rights and responsibilities. Bookkeepers record and organize your financial records. Accountants interpret your bookkeeper's data and prepare your financial statements.
Most bookkeepers and accountants are NOT licensed to sign your tax returns or represent you in IRS matters. You’ll need a CPA or IRS enrolled agent for that. (For more info on IRS rules dictating who can practice before the IRS, see IRS Circular 230.)
The bookkeepers in our Bellingham, Washington office can request CPA services from our network of remote CPAs at any time, so you won’t have to hire a separate firm if the need arises.
Daily Tasks a Bookkeeper Can Help You With
Bookkeepers can help you stay up to date on the state of your finances at all times by completing a variety of daily tasks for you. No delays. No work stacking up. They can spot problems right away and bring them to your attention quickly for faster resolution.
Here are some of the daily duties a bookkeeper can handle for you:
- Send invoices - manage accounts receivable and track who owes you money
- Pay bills - manage accounts payable, keep your vendor relationships intact, and obtain discounts for early/on-time payment
- Record incoming payments - match your deposits to your outstanding invoices
- Enter and code expenses - correctly categorize your expenses in QuickBooks Online or similar accounting software so you don’t scramble to do that at the end of the year
- Review your bank feed - flag duplicate entries, missing transactions, and any suspicious charges on your accounts
- File receipts and paper checks - scan your physical and/or app-based receipts and paper check payments using Hubdoc or QuickBooks so your cash flow stays up to date
Need help with bookkeeping tasks you don’t see on the list? We can customize our bookkeeping service to meet your needs.
Monthly Bookkeeping Tasks
Monthly bookkeeping includes much more than closing the books at the end of the month. Bookkeepers process payroll, generate monthly reports, detect suspicious or unauthorized charges, and much more.
If you only do one thing, reconcile your accounts. If you don’t reconcile, you could be overpaying and not even realize it. One of our clients was double-billed $3,900 for materials. We caught the error during reconciliation, and our client received a refund.
Here are some of the monthly duties a bookkeeper can handle for you:
- Bank and credit card reconciliation - detect duplicate, suspicious or unauthorized charges
- Run accounts receivable aging reports - follow up on overdue invoices for faster payment
- Process payroll - local bookkeepers stay up to date on state legal requirements, including Labor & Industries (L&I) requirements for the state of Washington and PFML (Paid Family Medical Leave) deductions
- File sales tax and B&O tax with the Washington Department of Revenue - small businesses new to the state may be unfamiliar with the monthly reporting requirements of Washington's Business & Occupation (B&O) gross receipts tax
- Close the books - lock financial records for the previous month so your historical data can't accidentally be changed
- Generate monthly reports - including P&L, balance sheet, cash flow, etc, along with notes from the bookkeeper, flagging any unusual activity for your review
Year-End Bookkeeping Tasks
Bookkeepers may not file your taxes, but they play a critical role in how much you pay for tax prep or CPA services. A small business bookkeeper keeps your books clean and complete, making the end of the year less of a mad scramble to catch up.
Here’s what you can expect your bookkeeper to do at the end of the year:
- Year-end reconciliations - match your entries to bank, credit card, and loan statements, so you can catch any surprises in December, not March.
- Issue 1099s and W-2s - ensure filing before the January 31 deadline, help you determine when and whether you need to file 1099s or W-2s, and avoid scrambling for missing W-9 forms in January
- Inventory management - track inventory for state sales tax reporting for your farm, retail or construction business
- Tax document handoff - provide your tax preparer/CPA with clean books for more accurate tax returns, lower risk of IRS issues and potential savings of $1,500–$3,000 in CPA cleanup time
- Fixed asset and depreciation schedule review - record new equipment purchases and disposal of equipment for greater tax benefit
- Discuss strategy for next year - help you identify potential savings and determine the best time to make new purchases and/or make retirement plan contributions, including SEP and SIMPLE IRAs
What Bookkeepers DON’T DO
Bookkeepers play a critical role in your business, but there are a few scenarios where you may need the services of a CPA in addition to bookkeeping.
A few examples:
- Bookkeepers DON’T sign your tax return. That requires a CPA, an IRS Enrolled Agent, or a paid tax preparer with a Preparer Tax ID Number provided by the IRS.
- Bookkeepers DON’T give tax strategy advice. If you need guidance on issues like S-corp election timing, reasonable compensation studies, R&D credits, etc., you need a CPA.
- Bookkeepers have limited IRS representation rights. They can only work with the IRS on returns they personally prepared, and only before revenue agents, not appeals officers. (See Treasury Department Circular 230.)
- Bookkeepers don’t perform audits or reviewed financial statements. Reviewed/audited statements legally require a CPA's signature. Because Clarity Tax and CPA’s is full service, we have tax pros and audit pros that will work alongside the bookkeepers to do this work.
"I can answer most of the questions we get from clients, because I've been doing this for years. But the harder tax questions, I refer to Caroline. She's our Enrolled Agent. And for the really complex stuff, like multi-state, crypto, or audits, we pull in one of the remote CPAs on our team. Knowing what you're hiring for is half the battle."
Tiffany van Duker, Bookkeeper
What You Can Expect from Your Clarity Tax Bookkeeper
Bookkeepers become an invaluable daily resource whenever you have questions or concerns. They make sure every expense is logged correctly so you don’t have to do that at tax time. They keep track of filing deadlines and new regulatory reporting requirements while managing your payroll, accounts receivable and payable, and more.
What that might look like:
Monday through Friday - Your bookkeeper logs every deposit you make. Every two weeks, she processes your payroll, and scans copies of any paper checks you write to pay your subcontractors. She makes sure all of your job-related material expenses are logged correctly for tax purposes and assigns them to the right project. She answers your questions when you aren’t sure whether you need to issue a 1099 for one of your subcontractors.
Monthly - In addition to these duties, each month, your bookkeeper reconciles your business checking and credit cards. She flags any suspicious or unauthorized charges, and watches for any overpayments or duplicate charges. She also files your monthly Washington B&O tax return and sales taxes.
The end of the year - At the end of the year, your bookkeeper issues 1099’s for all of your subcontractors and finalizes your payroll tax returns. Then she hands a clean set of your financials to our IRS Enrolled Agent, Caroline Sporer, an IRS Enrolled Agent, so she can prepare your return.
Because your bookkeeper has been carefully maintaining your financial records all year, there’s no rush, no scramble trying to remember where things are as tax time approaches. This is where bookkeepers can save your business a lot of time and money, as much as $1,500-$3,000 in CPA cleanup fees that can delay your return.
Starting the tax season with clean books can also lower your risk of IRS issues. If you need a CPA to file the return for you, your bookkeeper can request the assistance of one of the remote CPAs in our network to assist you. You won’t have to engage a second firm.
6 Signs You Need to Hire a Bookkeeper
As useful as bookkeeping services are, not everyone needs to hire a bookkeeper. It depends on how much business you’re doing and how well you can handle the daily, monthly and annual logging, categorizing and financial filing requirements for your business.
If any of these sound like you, you may need to hire a bookkeeper:
- You have more than 20–30 financial transactions per month
- You've missed a sales tax or payroll deadline and/or paid a penalty)
- You're behind on your bank reconciliations
- You're using a personal account for business expenses
- You've outgrown the "shoebox of receipts" approach
- Your CPA has billed you for "cleanup" in the past 12 months.
How Much Does a Bookkeeper Cost?
How much your bookkeeper costs is based on your needs and whether you want to pay by the hour, provide a monthly retainer for bookkeeping services, or hire bookkeepers solely for cleanup services.
The U. S. Bureau of Labor Statistics lists the median 2024 salary for full-time bookkeepers as approximately $49,210 or $23.66/hour.
However, below are more realistic estimates that you can expects when hiring a professional firm like Clarity Tax & CPA:
- Monthly retainer: $300–$1,500/month for most small businesses
- Cleanup engagements: priced per project
Request a quote on bookkeeping services priced based on your needs
Frequently Asked Questions
Is a bookkeeper the same as an accountant?
Bookkeepers are NOT the same as accountants. Bookkeepers organize and record all of your financial transactions. Accountants interpret the data your bookkeeper collects and prepare your financial statements before giving them to your tax preparer or CPA to file.
Most bookkeepers and accountants do NOT sign tax returns and can’t represent you in IRS matters. For that, you’ll need to engage a CPA or IRS enrolled agent. We have remote CPAs we work with, so if you need one, you won’t have to go to a second firm to engage them. We can contact one of ours to assist you.
(For more info on IRS requirements regulating who is allowed to practice before the IRS, see IRS Circular 230.)
Learn more about the differences between bookkeepers and CPAs.
Can a bookkeeper file my taxes?
A bookkeeper with a Preparer Tax Identification Number (PTIN) issued by the IRS can prepare and sign simple returns, but most tax filings, especially business returns, go to a CPA or IRS Enrolled Agent.
At Clarity Tax & CPA, even our bookkeepers who have IRS-issued PTINs often present returns to one of our IRS Enrolled Agents for signature. This team approach provides one more layer of protection for your business. It can potentially reduce your risk of IRS issues, and make it easier for us to assist you if a problem arises.
Do I need a bookkeeper if I use QuickBooks?
Software records what you tell it, whether it’s correct or not. Bookkeepers make sure what you tell it is right.
How often should a bookkeeper reconcile my accounts?
You should reconcile your accounts on at least a monthly basis. Weekly reconciliation is ideal for fast-moving businesses. It’s always better to spot duplicate charges, overcharges and suspicious or unauthorized activity as quickly as possible.
What's the difference between a bookkeeper and an Enrolled Agent?
An IRS Enrolled Agent (EA) is federally licensed to represent taxpayers before the IRS. A bookkeeper is NOT.
Do bookkeepers handle Washington B&O tax?
Yes. Bookkeepers typically make sales tax payments and set up B&O filings. You don’t need a CPA for those tasks.
Bookkeeping Services in Bellingham, Whatcom County, Washington and Nationwide
Bookkeepers can help you stay on top of daily financial transactions, ensure your expenses are categorized correctly for tax purposes, spot suspicious transactions and keep your books clean and ready for the end of the year. Clean books are the secret to a successful, on-time tax filing or financial statement audit.
Clarity Tax & CPA’s provides bookkeeping for small businesses like yours in Bellingham and throughout Whatcom County and the state of Washington. We also work remotely with clients nationwide. If you're behind on reconciliations, dreading tax season, or just tired of doing this yourself, request a bookkeeping consultation.
Author
Tiffany van Duker, bookkeeper at Clarity Tax & CPA’s and IRS-authorized PTIN holder with over four years bookkeeping experience. Tiffany works in our Bellingham office with many farm, construction and retail clients in Whatcom County and throughout the state of Washington.