What Does a Bookkeeper Actually Do?

If you've ever wondered whether you really need a bookkeeper—or what one actually does beyond "something to do with spreadsheets"—you’re not alone.

For many small business owners, bookkeeping sits in that grey area between essential admin and "I'll figure it out later." But here’s the truth: good bookkeeping is the difference between being busy and being in control.

Let’s break down exactly what a bookkeeper does, why it matters, and when it’s time to bring one into your business.

The Core Duties of a Bookkeeper

A bookkeeper is responsible for managing, organising, and maintaining a business’s financial records. These tasks may sound simple in theory, but in practice they create the backbone of a business’s financial operations. For most businesses, it's the bridge between running your business and understanding what’s really going on financially.

Here’s what a small business bookkeeper typically handles:

1. Income and Expense Tracking

Accurate income and expense tracking gives you visibility into your business’s day-to-day performance. A bookkeeper will:

• Record every sale, refund, or other income source

• Track supplier invoices and record every business-related expense

• Categorise financial transactions appropriately for income tax and reporting

• Maintain consistent naming conventions in accounting software

• Ensure all business finances are regularly reviewed and up to date

• Track all services sold and ensure income is recorded clearly and promptly

• Reflect the true cost of doing business across your financial data

• Support transparency in what the company owns versus what it owes

2. Bank and Credit Card Reconciliation

Reconciling your books with your bank statements is a key control process. It helps prevent errors and highlights financial risks early. A bookkeeper will:

• Compare internal records with bank statements and credit card reports

• Identify and correct discrepancies

• Ensure no transactions are missing or duplicated

• Reconcile multiple bank accounts regularly

• Maintain accurate financial records and documentation

• Spot red flags such as double payments, unexplained spending, or missing entries

• Simplify bank reconciliation using compatible software and automated rules

3. Accounts Payable Management

Managing what you owe is just as important as tracking what you earn. A bookkeeper will:

• Enter and track all supplier invoices and utility bills

• Monitor payment terms and ensure timely payment of suppliers

• Schedule payments based on due dates and cash flow

• Record transactions correctly for future reporting

• Maintain vendor histories and accurate records

• Avoid missed deadlines that impact cash flow and relationships

4. Accounts Receivable and Invoicing

Getting paid on time is essential. Bookkeepers take a structured approach to managing receivables. They will:

• Create and send accurate sales invoices

• Record incoming payments

• Follow up on outstanding balances

• Chase payments politely but persistently

• Minimise late payments and protect cash flow

• Ensure customer payments are logged against the correct services

5. Payroll Preparation (if applicable)

Payroll is a regular commitment and one with strict deadlines. Bookkeepers can:

• Calculate wages, benefits, and deductions

• Use cloud accounting software to automate payroll workflows

• Liaise with HMRC for PAYE and National Insurance compliance

• Maintain accurate payroll records for the current accounting period

6. VAT Preparation and Filings

Meeting VAT obligations isn’t just about numbers—it’s about systems. Bookkeepers will:

• Track VAT on income and expenses

• Reconcile VAT accounts

• Submit VAT returns via Making Tax Digital-compliant software

• Reduce stress at filing time by keeping everything current

7. Cash Flow Monitoring

Keeping track of what’s coming in and going out helps most businesses avoid shortfalls. A bookkeeper will:

• Create a rolling cash flow forecast

• Highlight upcoming pressures and income gaps

• Monitor financial activity against historical performance

• Set up contingency plans if income slows

• Save time by automating recurring reports and alerts

8. Month-End Close Tasks

Each month should end with a financial check-in. A bookkeeper will:

• Reconcile all business accounts

• Finalise key reports: balance sheet, income statement, cash flow statement

• Highlight mispostings or trends for review

• Ensure records are accurate and ready for your accountant

9. Record Keeping and Compliance

Good record keeping supports legal obligations and stress-free audits. A bookkeeper will:

• Store financial documents securely for at least six years

• Maintain a searchable archive of receipts, invoices, and bank statements

• Help the business stay compliant with tax return requirements

• Track the company’s income and expenses accurately

• Keep data clean and audit-ready for HMRC or funding applications

10. Reporting and Financial Insights

More than admin, a bookkeeper helps you lead with numbers. They’ll:

• Prepare clear, consistent financial reports

• Translate raw data into actionable insights

• Track business performance across periods

• Provide reports that support government grants, tax filings, and strategic decisions

What a Bookkeeper Doesn’t Do

It’s important to distinguish between bookkeeping and accounting.

Bookkeepers do not:

• File end-of-year tax returns (unless specifically trained and authorised)

• Offer tax planning or legal financial advice

• Create financial forecasts or budgets

But they do build the system that makes all those tasks possible. Without them, your accountant is working in the dark.

Why It Matters

These tasks aren’t just admin—they’re critical to running a stable, credible, and successful business:

• Saves time: You don’t waste hours reconciling mismatched transactions

• Improves accuracy: You maintain accurate records, up to date with the latest activity

• Reduces risk: You meet deadlines, avoid penalties, and stay compliant with legal obligations

• Improves cash flow: You track outstanding debts, pay bills on time, and understand your financial position

• Supports business performance: You can monitor services sold, margins, and customer trends in real time

• Keeps your business credible: If you need a tax return, a grant, or a line of credit, your records are already ready

When to Hire a Bookkeeper

Doing your own books is a great place to start, but most businesses outgrow that stage. You may need a professional bookkeeper when:

• You’re spending too much time on admin

• You’re unsure if your records are accurate

• You’ve missed tax deadlines or had to chase receipts at the last minute

• You want better visibility into what the company owns and what it owes

Hiring a bookkeeper doesn’t just keep you organised—it frees you to focus on growth.

Final Thought: Bookkeeping is the Engine Room

Bookkeeping doesn’t just clean up your numbers. It keeps the whole system running—so you can spend your time making more money, not figuring out where it went.

Whether you’re a sole trader, a limited company, or a team on the move, your books are the foundation. And a great bookkeeper keeps them strong.

Ready to stop guessing and start leading with numbers? Book your free back-office audit and let’s build a system that works for you—not against you.

Frequently Asked Questions

What are the benefits of hiring a bookkeeper for a small business?

A dedicated bookkeeper improves accuracy, keeps you compliant with Making Tax Digital, saves time, and provides reliable financial information to support better decisions.

Can bookkeeping software replace a bookkeeper?

Not entirely. While software automates tasks like bank reconciliation and invoice tracking, a human bookkeeper brings judgment, context, and experience—especially when things don’t add up.

How does bookkeeping affect my ability to pay tax?

Accurate bookkeeping ensures you know exactly what you owe, when, and why. It also prevents surprises and penalties by making sure your tax return is complete and on time.

Do I need a bookkeeper if I already have an accountant?

Yes. Your accountant focuses on strategy, tax, and big-picture finances. Your bookkeeper keeps everything clean, current, and accurate day to day—so your accountant has good data to work with.

How do bookkeepers help with business expenses?

They track, categorise, and monitor all the money flowing out of your business, helping you stay within budget, spot overspending, and prepare for deductions.

Is cloud accounting software enough for a small business?

It’s a great tool, especially when combined with human input. Cloud accounting software provides real-time insights and helps automate record keeping—but oversight and decision-making still require a bookkeeper’s support.

What happens if I don’t keep accurate records?

You risk missing tax deadlines, receiving penalties, and losing visibility into your financial health. Poor record keeping can also affect your eligibility for funding and create issues during audits.

What’s the difference between an accountant and a professional bookkeeper?

A professional bookkeeper focuses on recording transactions and day-to-day financial activity. An accountant analyses that data, advises on tax, and helps plan strategically.

What financial statements does a bookkeeper produce?

Typically, they prepare profit and loss reports, balance sheets, income statements, and aged receivables or payables—reports that are key to understanding your company’s financial performance.

Why is it important to stay up to date with your books?

Up-to-date books give you clarity, prevent surprises, and help you respond quickly to cash flow changes, customer behaviour, or growth opportunities.