How Difficult Bookkeeping Can Be
Written by Bindi Gethen
Bookkeeping might seem like a daunting task to many – pages of numbers, endless financial statements, and the constant worry about accuracy and regulatory compliance. It’s no wonder that the mere thought of taking on the books can make even the most seasoned business owners feel a bit uneasy.
The challenge often lies in the details; each transaction needs to be meticulously recorded, and every figure must add up perfectly. This can be especially overwhelming when you’re trying to juggle everything else involved in running a business.
So is it tough being a bookkeeper for a small company? Well, that largely depends on your personality. For those who have a knack for numbers and a love for order, bookkeeping can be incredibly satisfying. But if you’re not the type who enjoys digging into details and organising data, it can seem like a never-ending puzzle. The key is understanding what strengths you bring to the table and whether those align with the demands of bookkeeping.
Is bookkeeping easy or hard?
Bookkeeping can be perceived as easy or hard depending on several factors, including one’s personality, aptitude for numbers and details, organisational skills, and interest in finance. Here’s how personality might influence one’s experience with bookkeeping:
Attention to Detail
People who naturally pay attention to details might find bookkeeping easier because it requires meticulous record-keeping and precision. Those who are less detail-oriented may find the need for accuracy and thoroughness challenging.
Organisational Skills
A well-organised person might excel in bookkeeping since it involves keeping financial records orderly and managing multiple accounts efficiently. Those who struggle with organisation might find this aspect hard.
Patience and Perseverance
Bookkeeping can be a repetitive and time-consuming task. Individuals who are patient and can handle repetitive tasks without losing focus may find bookkeeping to be less taxing.
Affinity for Numbers
If you have a natural affinity for numbers and enjoy working with them, bookkeeping might seem simpler to you. Conversely, those who find numerical data intimidating or tedious may struggle more.
Adaptability to New Technologies
Modern bookkeeping often involves software and tools that streamline the process. Being adaptable and tech-savvy can make bookkeeping easier, whereas resistance to using new technologies could make it harder.
Related articles:
How Much Do Bookkeepers Charge in Australia?
Is Bookkeeping a Dying Profession?
4 things bookkeepers do for small businesses
1. Recording financial transactions
Recording financial transactions is the bedrock of bookkeeping. Every financial activity within the business – whether it’s a sale, purchase, payment, or receipt – needs to be documented accurately to maintain transparent financial records.
Bookkeepers use a system, often double-entry accounting, to record transactions. This means each transaction affects at least two accounts: one account is debited, and another credited. For example, when a business makes a sale, the bookkeeper records a debit to the cash or accounts receivable account and a credit to the sales account.
Modern bookkeepers also often use accounting software like QuickBooks, Xero, or FreshBooks. These tools help streamline the entry of transactions and reduce errors. They also allow for real-time tracking of the business’s financial status, which is crucial for timely decision-making.
Pro tip
Accurate recording ensures compliance with laws and regulations, supports financial analysis and decision-making, and prepares the business for audits. It's essential for maintaining the financial health and integrity of a small business.
2. Managing accounts payable and receivable
They manage the business’s accounts payable (what the business owes to suppliers) and accounts receivable (what is owed to the business by customers), making sure that invoices are issued, payments are received, and bills are paid on time. This task is critical for maintaining healthy cash flow.
Example
For instance, a bookkeeper might delay paying a supplier to keep more cash on hand if there are no penalties, or they might offer customers early payment discounts to accelerate cash inflows.
If cash is tight, the bookkeeper might arrange for a payment plan or even stretch the payment to the full term, balancing between maintaining a good supplier relationship and managing cash flow.
Related articles:
Why You Shouldn’t Learn Bookkeeping On Your Own
The Dual Satisfaction of Bookkeeping: Being Helpful and Getting Paid
3. Preparing financial statements
Bookkeepers compile data from the recorded financial transactions to generate these reports (e.g., income statement (profit and loss), balance sheet, cash flow statement).
The income statement shows the company’s revenues and expenses over a specific period, illustrating profitability. The balance sheet provides a snapshot of the company’s assets, liabilities, and equity at a particular point in time, indicating financial stability. The cash flow statement tracks the inflow and outflow of cash, highlighting how well the company manages its liquid resources.
Example
If a business earns $50,000 in revenue and incurs $30,000 in costs and expenses, the income statement would show a net profit of $20,000 for that period. Concurrently, the balance sheet would list assets such as cash, inventory, and equipment, and compare these against liabilities like loans or accounts payable to depict the net equity.
Pro tip
Financial statements are essential not only for internal management to make informed decisions but also for external stakeholders such as investors, banks, and regulatory agencies to evaluate the business’s financial position and compliance.
4. Payroll processing
This involves the calculation of employee wages, withholding taxes, and ensuring accurate and timely payment. This task requires attention to detail and an up-to-date understanding of tax laws and regulations.
Bookkeepers must calculate gross wages based on hours worked or salaries, then deduct taxes and other withholdings to arrive at the net pay. They also need to handle filings like payroll tax reports and ensure contributions to retirement funds and health insurance are correctly processed.
Example
Consider an employee who earns an annual salary of $60,000. The bookkeeper calculates the monthly gross pay, which would be $5,000. From this amount, they need to deduct taxes according to the Australian Tax Office (ATO) guidelines, as well as contributions to the Superannuation Guarantee, which is let’s say 10.5% of the employee’s earnings. This means $525 goes to the employee’s superannuation fund each month.
The bookkeeper also handles deductions for the Medicare levy, which is typically 2% for most taxpayers, amounting to $100 in this case. If the employee has any salary packaging arrangements such as additional superannuation contributions, vehicle leases, or fringe benefits, these would also be calculated and deducted accordingly.
Finally, the bookkeeper issues the net pay, considering any bonuses, overtime, or commissions, if applicable. This ensures that the employee’s pay slip reflects all the necessary deductions and contributions, maintaining compliance with Australian financial regulations.
Pro tip
Efficient payroll processing is vital for employee satisfaction. When employees are paid accurately and on time, this maintains morale and supports the overall operational efficiency of the business.
Frequently Asked Questions
Starting and operating a bookkeeping business can be quite challenging, though it offers substantial rewards and opportunities for those with a passion for finance. The challenges include acquiring and retaining clients, ensuring meticulous accuracy in handling financial records, and adapting to the ever-evolving technology and regulations in accounting.
Success in this field requires not only technical skills but also excellent organisational and communication skills to manage client expectations effectively. With dedication and the right strategies, these challenges can be navigated successfully, leading to a fulfilling career which I’ve had at The Bookkeeping Studio.
The most significant challenge many bookkeepers face is the sheer amount of time required to complete their tasks accurately and thoroughly. Accurate bookkeeping demands meticulous attention to every financial detail, from recording daily transactions to preparing complex financial reports.
This process can be time-consuming because it involves not only data entry but also careful review and reconciliation to ensure everything is correctly accounted for and complies with regulatory standards. The need to manage these responsibilities efficiently while maintaining accuracy adds to the challenge, making time management a critical skill for any bookkeeper.
The cost of virtual bookkeeping services varies widely based on factors such as geographical location, the complexity of the business’s finances, and the level of expertise required. For small businesses, hourly rates for bookkeeping services can range from $20 to $100. Alternatively, flat monthly fees might range from $150 to $1,000, reflecting the ongoing nature of the work and the level of detail required.
At The Bookkeeping Studio, our virtual bookkeeping services start at $170 weekly.
While bookkeeping can be a stable and rewarding career, it does come with challenges that can affect work-life balance and job satisfaction. The work often requires long periods of focus on detailed data, which can be mentally exhausting and sometimes monotonous.
During peak periods like tax season, the workload can significantly increase, leading to longer hours under stressful conditions. Additionally, keeping up with the latest technology and regulatory changes requires ongoing education and adaptation. For those who thrive on human interaction, the typically solitary nature of the work can sometimes feel isolating.
Check out a previous blog post on “7 Disadvantages of Being a Bookkeeper (That I Don’t Mind)”.
Take advantage of our hassle-free bookkeeping services
Let’s face it, your time is better spent on the parts of your business that need your personal touch – like growth strategies, customer relationships, and product development. By handing off the nitty-gritty bookkeeping work to experts, you free up your schedule to focus on what you do best.
Professional bookkeepers bring a level of precision you’ll appreciate. They’re trained to spot even the smallest discrepancies that could throw off your entire financial statement. They will even save you money in the long run.
If you’re feeling the weight of managing your business’s finances, it might be time to hand it over to someone who handles numbers like a pro. With our hassle-free bookkeeping services, you can sit back and focus on what really matters: growing your business. Let us take care of the books. Get in touch today and take the first step towards stress-free financial management.
Hey, my name’s Bindi Gethen! I’m the founder of The Bookkeeping Studio in Australia. With over 15 years of experience in the industry, I have a deep understanding of the challenges that small and medium-sized business owners face when it comes to managing their finances.
I am passionate about empowering my clients with the financial information they need to succeed. My team and I pride ourselves on our commitment to exceptional value, accuracy, and confidentiality. Our virtual bookkeeping services include payroll, budgets, and management reporting, among others.
Not to toot our own horn, but we can assure you that you won’t find a bookkeeping partner like us anywhere else in the Southern Highlands.
