Bookkeeping FAQ for Small Businesses

A bookkeeper handles the daily entry of business transactions into bookkeeping software. An accountant typically oversees bookkeepers, reviews compliance, analyzes financial data, and advises business owners or management. A CPA often focuses on tax, tax planning, and more complex business tax matters. A tax preparer enters tax documents into tax software and can help prepare personal and small business tax returns.

Yes. A dedicated bookkeeper is usually more cost-effective for day-to-day recordkeeping than paying a CPA firm to handle routine bookkeeping work. A tax preparer can only enter the information they are given into tax software; they may not know whether your records are complete or accurate. Good bookkeeping gives your CPA or tax preparer better information to work with.

A small business should hire a bookkeeper as soon as it can afford one. Accurate books help business owners understand their finances, monitor cash flow, and make better decisions. Without accurate financial information, business decisions become harder and potentially risky.

Many bookkeeping services charge $50 per hour or more. The most important thing is finding a quality bookkeeper who keeps your records accurate, communicates clearly, and helps you understand your business finances. Valley Bookkeeping and Tax also offers flat fee bookkeeping options for small businesses that want predictable pricing.

Yes. Waiting until tax season can create stress and make it harder to find missing receipts, invoices, and other important records. Monthly bookkeeping is easier to maintain and helps keep your business organized throughout the year.

You should provide anything involving business transactions, including receipts, invoices, bills, estimates, sales on credit, bank statements, credit card statements, loan documents, and other records connected to business income or expenses.

Ideally, books should be updated daily when business activity is happening. If your business is making sales, receiving payments, paying bills, or creating expenses, those transactions should be recorded promptly.

Yes. A bookkeeper can help clean up messy or behind books, but it can be a long process depending on how much information is missing or incorrect. That is why it is important to keep books accurate and up to date throughout the year.

In theory, bookkeeping can be cleaned up all the way back to the start of the business. Realistically, one to two years is more common. The farther back you go, the harder it can be to collect all the records needed to clean up the books accurately.

Bank reconciliation is the process of making sure your bank account matches what is recorded in your books. This is important because it helps confirm that cash transactions have been recorded properly and shows how much money the business has available to operate.

Business owners should review the Profit and Loss statement, Balance Sheet, accounts receivable aging report, and accounts payable aging report every month. These reports help you understand profitability, debt, unpaid customer invoices, and bills that need to be paid.

Good bookkeeping helps with taxes by making sure income, expenses, and other transactions are classified and recorded correctly. Accurate reports can then be used to prepare the business tax return. Clean books make tax season faster, easier, and less stressful.

Yes. Good bookkeeping shows where your money is going, where your business is most profitable, and which areas may need more attention. Understanding cash flow helps business owners plan ahead and make stronger financial decisions.

Deductible business expenses vary based on the type of business and other factors. Common deductible expenses may include advertising, utilities, rent, office supplies, software, professional services, and other ordinary and necessary business costs. A tax professional can help determine what applies to your situation.

For many small businesses, QuickBooks is a strong bookkeeping software option. Working with a QuickBooks ProAdvisor or experienced QuickBooks bookkeeper can also help you set up the software correctly and may help you access discounts on your QuickBooks subscription.

No. QuickBooks is bookkeeping software, but the software still needs accurate setup, correct transaction entry, reconciliation, review, and reporting. A bookkeeper helps make sure information is entered in the right place and used correctly.

Cash basis bookkeeping recognizes transactions when payment is made or received. For example, bills are recognized when they are paid. Accrual basis bookkeeping recognizes transactions when they occur. For example, bills are recognized when the bill is dated rather than when it is paid.

Yes. Business and personal expenses should be kept separate. Separating expenses gives you a clearer picture of how the business is doing and can help prevent bookkeeping and tax problems caused by mixing personal and business transactions.

You can review your books yourself or pay a professional to conduct an audit or review. This involves verifying expenses, payments, and supporting documents. At the end of the business year, it can be helpful to have a CPA review your books for accuracy. A good bookkeeper attaches relevant documents to entries to make review and auditing easier.