‘Bookkeeping’ is probably the most widely recognized term used to describe the entry, classification, and reconciliation of transactions in a general ledger system. More broadly defined, it includes activities like accounts payable (posting and coding invoices, paying bills), accounts receivable (preparing and processing customer invoices, reconciling customer payments to deposits), running payroll, and remitting sales taxes. Every business has to do bookkeeping work, whether an owner does it by moonlight or, by paying someone else to get it done.
Accounting technology has advanced to the point, however, that many bookkeeping tasks have become automatable and can now be tackled with considerably less manual effort. For example, you can have a bill automatically sent into an application, click one button and have it paid, sent to your accounting system, and automatically matched to a transaction occurring within your bank account.
The point is that expectations have changed for what used to be a time intensive, standalone function for many small businesses. Bookkeepers may keep their titles, but with the advancement and high pace of change in financial technologies, business owners are increasingly looking for that role to understand these technologies and guide them through the landscape, and for the same cost. A ‘Financial Operations’ team is better-suited to fill this role. Here are three reasons why:
Financial operations refer to the whole accounting and finance apparatus of a particular business, as well as how the various parts of that apparatus work together. It is easy for bookkeeping work to become marginalized, disconnected from the operational and non-financial parts of the business.
Technology helps turn the static data entry of bookkeeping into a dynamic, efficient, and insight-rich finance function for the core management of the business. These financial operations are more collaborative and can be delivered at the same cost as traditional bookkeeping.
At LUCA, financial operations imply a team approach to small business accounting and finance. This means that multiple people are involved in solving workflow issues, rather than a business owner trying to resolve them on the side, or else a bookkeeper reaching beyond his or her typical range of duties. Business process thinkers focus on integrating technology and human effort into financial operations that achieve the most effective results for management and, ultimately, the bottom line.
To reframe an earlier point, financial operations are built on a foundation of efficient and accurate bookkeeping, but they go much further. Because of the efficiencies gained by technology, especially the ability to automatically track and report on a plethora of business data, smaller businesses can now afford a finance function that was at one time only available to larger companies with big finance budgets. Financial operations incorporate bookkeeping into the broader goal of providing actionable insight to business owners hungry for guidance when it comes to strategic planning.
Regardless of whether bookkeeping, as a term, goes the way of the dodo bird or not, its function will continue to be enveloped into more encompassing financial operations. That progress is a good thing for business owners looking for more value in exchange for the trust and money they invest in bookkeepers and accounting partners.