Bookkeeping Services Contract: Everything You Need To Know
A bookkeeping services contract is a legal agreement that defines the scope of work, terms, and conditions when you hire a professional bookkeeper.3 min read
What Is a Bookkeeper?
This professional provides administrative help with running your business. A bookkeeper specializes in planning for and filing your taxes, managing accounts receivable and payable, and creating and administrating invoices. They can also manage tax withholding and other payroll tasks if you have employees.
Your business could benefit from hiring a temporary bookkeeper to get your finances organized and establish systems to streamline account management. They can make sure that all the cash flowing through your company is recorded appropriately. This will result in more efficient operations and allow you to focus on your core business tasks.
What Should You Look For in a Bookkeeper?
This person should have accounting knowledge and skills necessary to reconcile your business's financial records and enter data thoroughly and accurately. This includes information about bank accounts, credit cards, fees, bills, checks, invoices, deposits, and credit card charges.
A bookkeeper can help organize both your business and personal finances. However, it's important to find a person you trust and clearly outline your expectations for their temporary or permanent employment. This necessitates a clear, comprehensive bookkeeping services contract.
What Is the Revenue Recognition Principle?
As stated in "Accounting Explained," the revenue recognition principle is an accounting strategy in which revenue for a sale is recognized only when it is actually transferred into the account, not when the sale is made. This allows for a more reliable record and ensures that the full amount of the sale is recovered.
This concept is also known as realized revenue. This is in contrast to earned revenue, which is noted when the product or service is purchased, not when the revenue is actually received.
Another best practice is matching efforts, which means that production expenses will not be recorded for sales that have not yet been made and revenue will not be recorded for products and services that haven't been delivered yet. This principle ensures that your business activities and financial reporting are in concert.
Shareholders and investors want to see this consistency in your bookkeeping. Make sure that your bookkeeper is aware of the use of this method to maintain transparent, accurate financial records for the business.
How Is Contract Revenue Recorded?
- Contract revenue can be tracked using an accounting software such as QuickBooks.
- Create a deferred revenue account within the program.
- When a payment is made on that contract, enter it against the appropriate revenue account.
- Automatically adjust the account for monthly contract payments using a journal entry. This will move the record of the money from the deferred revenue account to the income statement.
- Reconcile open contracts by periodically tracking earned vs. deferred accounts.
What Should Be Included in a Bookkeeping Services Contract?
This sample contract is provided by Billy, a bookkeeping app.
WORK TO BE DONE
A. Scope/Limitations. Billy Inc. does not provide forensic auditing. Accordingly, our engagement for accounting services will not, and cannot, be relied upon to disclose financial errors, irregularities or illegal acts such as fraud or misappropriation which may exist or take place during the term of our engagement. Incomplete or inaccurate information provided to Billy Inc. (and our partners) will affect the ability of Billy Inc. to perform the services for which it is being retained. Should such matters come to our attention during the provision of services same shall be disclosed to the Client forthwith.
B. Agreed Upon Services. This agreement is for all managed services performed by Billy Inc. for the Client. This level of service is indicated by the subscription level the client has purchased and may include:
- Reconcile checking account with the bank statement each month for proper account balance and to identify any errors. We will make correcting entries directly to and identify the source of each adjustment. We will tell you of these adjustments and make you aware of any corrections.
- Review, analyze and reconcile general ledger accounts for accuracy and confer with you regarding any items not fully understood.
- Prepare and record all necessary journal entries to reflect correct accounting records.
- Prepare and present Financial Statements.
- Review Sales Journal and prepare Sales Tax Returns (if applicable).
- Setup of Billy and basic training (if applicable).
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