Note: In the diary book, it should have the date of events (transaction), the exchange of value which should be measurable (in cash or other measurements that could determine the value of the exchange), and the account titles which represent the value received or the value given.

The account titles or chart of accounts. The bookkeeping or recording of events differs depending on the business industry and its business nature. Bookkeeping also differs depending on the type of business such as small, medium, or large businesses. Hence, different bookkeeping services are created. Also, outsourced bookkeeping has been possible to sustain the needs of a business firm.

What are bookkeeping services?

Bookkeeping services are services related to financial of a business firm. Here are some examples:

1.) Bank reconciliations

It is the process where a business entity’s cash in bank balance is compared and reconciled to the bank statement balance or vice versa. It is important for a business to have a bank reconciliation every month. This is to check if the in-house records are tally or balance to the monthly bank statements. The difference between in-house records and bank records is called reconciling items. Here are some examples of reconciling items:

a.) Time differences

When a company deposited cash or checks, the company will record it as an increase in cash in the bank within the day. On the other hand, the bank will record the deposit of a company base on the bank’s cut-off time. If the banks receive the cash deposit from 8 am to 3 pm, it will record the cash deposit within the day.

Nevertheless, the deposit will be posted on the following day after the cut-off time. For checks, the bank will post the deposit on the statement of accounts once the check is cleared. The checks clearing usually takes 1 to 3 days.

b.) Postdated checks

It is a check written by the drawer for a date in the future. When a company deposited postdated checks, the company records them within the day. However, the bank will have to wait for the postdated check (future dated check) to be cleared. This is because the bank must wait for the time (written in the check) to come before the bank clears and posts the deposit on the statement of account.

c.) Service charge

These are the charges that the bank debits or deduct on a depositor’s account. For instance, fund transfer fee, charge on below maintaining balances, charge on dormant accounts (usually the account become dormant if no deposit or withdrawal made within 2years time) and charge on return checks (the reason why a check could return are: DAIF (drawn against insufficient balance) DAUD (drawn against uncollected deposit) or CA (closed account)

d.) Interest earned

This is the income from cash in the bank subject to a final tax of 20%. It is posted every month or quarterly.

e.) Errors

It is a mistake. For example, a company made a deposit to Bank A and erroneously recorded it as an increase in cash in Bank B. Then, in effect, the outstanding cash in bank balance from bank A will be understated. Then, the outstanding cash in bank balance from bank B will be overstated. The error could also be made by the bank recording deposit to client A which was supposed to be for client B erroneously. As a result, bank reconciliation is important at the end of the month to correct errors.

2.) Payroll

It is the amount a company pays its employees. The part where an employer needs a bookkeeper is the preparation of payroll. If the company operates from 9 am-5 pm, the computation of compensations normally computed as daily rate x (15days less absence) if the payroll is paid semi-monthly. If a company operates 24hours, there will be an additional computation to the normal computation of compensation. This is the night shift differentials and or overtime pay if there is.

There will also be a separate computation for regular holiday (double pay) and special holidays (1.5 pay) if there is. Another bookkeeping service the employer needs is the computation of benefits and deductions to the staff payroll. For example, medical allowance, meal allowance, traveling allowance, salary loans, government security contributions (sss, PhilHealth and pag-ibig premium contributions – employee share and employer share), and taxes if any.

3.) Taxes

It is a compulsory contribution to the state revenue. Every business industry has to give part of its income to the state, for how much taxes need to be paid depends on the industry and what kind of income is subject to tax. Here are some examples of taxes

a.) Documentary stamps – it is a tax mostly for contracts and obligations. Every legal document should have documentary stamps. The computation of documentary stamps depends on atc or alphanumeric tax code.

b.) Final tax – these are the one-time taxes. Examples of final tax are royalties and commissions, 1602 or final tax on deposit, 1601C or withholding tax on compensation 0619E or withholding tax expanded and 1601F or withholding tax on dividends.

c.) Percentage tax – it is a tax based on gross receipts. It is also called as 2551 tax

d.) Income tax return – it is a tax based on net income. It is also called as 1702 tax

4.) Handles Accounts Receivables

This is a claim against a debtor. Most large companies need a bookkeeper to handle their accounts receivables. For example in a healthcare business industry, resident doctors accept health insurance as part payment for the goods and services rendered. The healthcare business will then have a lot of receivables. This is when every patient pays their bills partly by insurance. So, that is the part where the bookkeeper comes in to maintain a schedule of balances every accredited insurance company owes to the doctors and the healthcare business industry.

Whenever an insurance company makes payments to the healthcare business, the bookkeeper deducts it from the outstanding balances. It is added to the receivables from an insurance company if there is an admission of a patient being paid partly by insurance.

5.) Handles Accounts Payable

It is an amount owing to a creditor. The bookkeeper maintains a record of the movement in accounts payable. For example, in a healthcare business industry when resident doctors accept insurance as part payment for the services rendered. The healthcare business will then have accounts payable to resident doctors.

Whenever the accredited insurance company makes payments to the healthcare business, the insurance company will provide lists of patients they will pay on a monthly basis. The bookkeeper will reflect it to the record and update every doctor’s individual accounts. The doctors will be paid based on the lists of patients an insurance company provided.

Why are bookkeeping services important?

Bookkeeping services are important in terms of decision-making and essential for the business to grow and prosper. Businessmen use financial statements in making effective and efficient decisions for the business. They use financial statements to track the performance of a business for a specific period of time. Also, it can identify the peak season and recession period to decide what promo to create. This strategy eliminates recession or minimum sales.

In addition, businessmen use income statements to decide whether to declare dividends or not. The company will give bonuses, raise the salary, buy more equipment and furniture, upgrade systems, hire more or fire employees, and open up new branches. They also use statements of cash flows to decide whether to invest more in financial instruments.

The decision-making of a company is critical. The growth or bankruptcy of a business depends on this. That is why bookkeeping is very important.

Moreover, the decision made, the plans, the budget, and the strategies are all based on financial statements which a bookkeeper prepares. There are companies that invest more in bookkeeping services. They even hire two bookkeepers to serve as a check and balances. It could be local or abroad.

What are the bookkeeping services for small businesses?   

One of the bookkeeping services for a small business is to prepare financial statements such as

1.) Statement of Financial Position

It is a statement where Asset accounts, Liability accounts, and Owner’s Equity accounts are presented. Asset account consists of two categories the current assets and non-current assets. Current assets are assets that can be converted to cash in less than 1 year. Non-current assets are assets that can be converted to cash for more than one year.

Examples of current assets are cash on hand, cash in the bank, short-term investment, merchandise inventory, and accounts receivables. Examples of non-current assets are bonds investment, long-term investment, land, building, furniture, fixture, and equipment.

Liability accounts consist of two categories: current liabilities and non-current liabilities. Current liabilities are liabilities that will due in less than one year. Non-current liabilities are liabilities that will due in more than one year.

Examples of current liabilities are Accounts payable, accrued taxes, short-term payable, and dividends payable while non-current liabilities are bonds payable, long-term payable, and retirement pay.

Owner’s Equity account consists of capital and undivided profit or retained earnings.

2.) Income Statement

It is the statement of profit or loss. It presents the income on the top followed by expenses and net income or net loss (difference between the income and expense). Income is the profit a business operation generates. The expenses are the cost incurred to do the operation of a business.

Examples of income are interest income, income from the sale, rental income, and service charges. Examples of expenses are Interest expense, salaries, and wages, rental expense, postage, power, light, water, and taxes.

3.) Statement of Cash Flows 

It is a statement to present the movement of cash. It should have the beginning balance of cash, what is added and deducted. On top of that, it should have an outstanding cash balance available for use.

4.) Statement of Owner’s Equity

It is a statement where the changes in equity are presented. Here are some examples of the changes in equity: additional capital, undivided profit, and dividends declaration. The additional capital, and undivided profits are both added to the equity. Meanwhile, dividends declaration is a deduction to the equity.

Other bookkeepers prepare a note to the financial statement where the further explanation of the four financial statements is written. It includes the reasons on how the amount arrives from a specific increase or decrease. Furthermore, it writes on why there’s a significant or huge change in the financial statements compared to previous records.  

Other bookkeeping services for a small business are tax preparation, payroll management, and recording of gross receipts or sales.

Why outsource bookkeeping?

Outsource bookkeeping is an alternative bookkeeping service either from a freelancer or a firm. The goodness about outsourced bookkeeping is that the company can be customized. It is based on the specific bookkeeping services the company needs for its financial affairs. In this case, there is no need to build an accounting department.

Otherwise, the company has to pay for training and regular additional expenses if they form an accounting department. For example, medical allowance, meal allowance, traveling allowance, government security contributions like sss, PhilHealth and pag-ibig premium contributions, insurances, and other required benefits mandated in order for a business to operate.

By outsourcing, the company could prevent manipulation of the financial statements. This is because a bookkeeper is not limited to one person or one firm, the position is not permanent. Thus, a company can change a bookkeeper anytime and anywhere. It can also choose an expert in the field of bookkeeping with a quality service for lower rates compared to a regular 9-5 bookkeeper.

Bookkeeping for every business industry differs depending on the nature of the business. It also depends on the size of the company. That is why different bookkeeping services are created to meet and sustain the needs of every business industry. Outsource bookkeeping could be from local or abroad.  

What are the bookkeeping services in the Philippines?

1.) Registers and process business permits

2.) Prepares and interpret financial statements

3.) Manage application, loans and remittance of sss, philhealth and pag-ibig contributions

4.) Filing and remittance of taxes

5.) Payroll

6.) Recording of gross receipts or sales

7.) Bank reconciliations

8.) Monitoring of monthly recurring bills payments

9.) Handles Accounts Receivables

10.) handles Accounts Payable

In conclusion, bookkeeping services are important and helpful. One of the good things about outsourced bookkeeping is the cost. Employers around the world could get quality services at a low cost. The cost of outsourced bookkeeping is lower in Asian countries.

One of the cheapest rates in outsourced bookkeeping is in the Philippines. On top of that, Filipinos are known to be friendly and family ties. That’ is why it is easy to connect with a Filipino. Employers get to feel the spirit of family, the initiative, and the care which a company needs especially in taking care of its financial affairs. If you need help, please contact us