Thinking about starting your own bookkeeping business? If so, you’re in the right place to take your first steps as you go from idea to reality.
There are many reasons why you might want to start a bookkeeping business. Perhaps you’ve worked as an in-house bookkeeper for a business and you’re ready to take the plunge and set up for yourself.
Maybe you’ve been made redundant and setting up for yourself gives you a great opportunity to take control of your destiny.
Or perhaps you’ve always had a burning desire to start your own business, are good with numbers, organised, looking for flexibility, and want to do something that will help clients achieve their goals.
No matter the reason, running your own bookkeeping practice can be extremely fulfilling.
So, if you’re interested in starting your own bookkeeping business, read this article to discover the key steps you need to take.
Here’s what it covers:
What’s the difference between a bookkeeper and an accountant?
How software can help to manage business processes
How to start a bookkeeping business
Rules and regulations to comply with
Get insurance so you’re protected
Final thoughts on starting a bookkeeping business
What’s the difference between a bookkeeper and an accountant?
The terms ‘bookkeeper’ and ‘accountant’ are occasionally used interchangeable, but they are in fact two different roles.
A bookkeeper keeps track of monies coming into and out of a business by maintaining accurate financial records, according to the International Association of Bookkeepers (IAB), the largest bookkeeping institution in the world.
Bookkeepers can help small and medium-sized enterprises (SMEs):
- Prepare for year-end tax and VAT returns.
- Keep on top of day-to-day cash flow.
- Efficiently run their finances.
Characteristics of becoming a bookkeeper include being accurate in your work and having a good understanding of financial topics.
Some bookkeepers also offer commercial brokering services, which involve helping businesses get the best deal when it comes to renewing insurance, buying new equipment or leasing company vehicles.
Catherine Pyman runs her own bookkeeping business.
She says: “Bookkeepers keep accurate accounting records for a business to enable the business owner to view financials.
“These can then be sent to the accountant to produce the year-end accounts. Bookkeepers also prepare VAT returns and can offer Self Assessment tax returns and payroll duties.
Claire Adams started her business Papertrail Bookkeeping after she was made redundant from her job of 27 years.
She says: “We process VAT returns, reconcile bank accounts [making sure the software matches the actual bank statements], we process payroll and everything that entails, we complete personal tax returns, final accounts for sole traders, and accounts/corporation tax returns for micro entity businesses.”
What does an accountant do?
There are numerous roles that accountants perform for their clients. Among them are the following:
- Gauge the financial situation of businesses and further communicate the information to the relevant authorities.
- Prepare financial statements as part of the accounting process.
- Use special skills due to the analytical and complex nature of accounting.
- Act as a trusted adviser to businesses.
How much should you charge for your services?
Essentially, there’s no clear answer on how much you should charge. Factors to consider include:
- Your bookkeeping experience.
- The needs of your market.
- The services you’re offering.
- The size of business you’re working with.
Generally, you’ll charge either an hourly rate or a monthly fixed fee. You may even negotiate a retainer fee with some (or all) of your clients.
Adams from Papertrail Bookkeeping says bookkeepers generally charge around £25 per hour “but it does depend on the work taking place”.
She adds: “I tend to charge my clients a fixed fee to cover everything, so the client knows how much they’re paying up front.”
Setting your fees and getting your pricing right for your bookkeeping business will take a bit of work but don’t feel that you need to price yourself too low.
Remember, you’re selling your expertise and adding value to clients who need what you’re offering.
Your one stop shop for starting a business
Thinking about starting a business or already putting your ideas into action? We’ve got the resources, expertise and software to help you achieve your goals.
How software can help to manage business processes
Digital software can help you monitor the workings of a business in real time. You can then report analysis from those numbers and enable your clients to make better informed decisions based on their finances.
Despite its name, good accounting software isn’t just for accountants. It can be used for your bookkeeping business, allowing you to view the finances of your clients and create financial reports, among numerous other things.
And by using a cloud accounting solution, you’ll be able to access the numbers on any device, wherever you are.
That means you can work with your clients in real time to go over their bookkeeping and highlight any queries with ease.
How to start a bookkeeping business
Ready to take the first steps to start your own bookkeeping business? Here’s what you need to do.
Do your research and create a business plan
Before setting up your bookkeeping business, it’s important to do your research. Questions to ask include:
- Who will your clients be? Perhaps small businesses (50 employees or fewer, for example), micro businesses (nine employees or fewer), or sole traders.
- How will you find clients for your bookkeeping business? This could include friends and family, your previous workplace, local advertising, website and social media marketing, and word of mouth.
- What services will you be offering your clients? It could cover recording cash receipts, making bank deposits, paying supplier invoices, maintaining an annual budget, payroll management, and so on. What services you offer very much depends on your clients’ needs.
- How will you work with clients? Are you going to offer a one-off bookkeeping service or an ongoing contract?
All these considerations are part of the bigger picture of your bookkeeping business plan.
Do you have one, three or even five-year plans for your business? What do you want to achieve with your bookkeeping business in terms of employing staff, turnover and success?
It’s important to do your research before starting out so you’re clear about the path you want to follow and the goals you’d like to achieve.
If you want further information about the above and more, the best place to start is the IAB.
It’s got more than 150,000 students and members. You’ll find plenty of information about the bookkeeping profession on its website. For example, the professional exams and qualifications people have to take in order to qualify as a bookkeeper.
These qualifications are recognised industry-wide and cover everything from understanding business documents, managing books and being able to post and make entries, to managing credit control, recording ledger accounts and preparing trial balances and other statements.
Qualifications to consider
Before you set up your bookkeeping business, it helps to do some training and gain relevant industry knowledge (if you haven’t already done so).
There are many bookkeeping courses available online and you can even get a qualification from one of the accounting or bookkeeping organisations:
- Association of Accounting Technicians (AAT)
- Chartered Institute of Management Accountants (CIMA)
- Association of Chartered Certified Accountants (ACCA)
- Institute of Chartered Accountants in England and Wales (ICAEW)
- International Association of Bookkeepers (IAB).
The IAB (and a number of other organisations such as AAT) offers a number of bookkeeping courses designed to fit around your lifestyle.
Its courses are regulated by Ofqual (The Office of Qualifications and Examinations Regulation), QiW (Qualifications in Wales) and CCEA (Council for the Curriculum, Examinations & Assessment).
There are three levels of qualifications from 1 to 3.
Examples include Level 1 Award in Bookkeeping, Award in Computerised Bookkeeping and Award in Computerised Accounting for Business. More details are available on the IAB website.
Most bookkeepers carry out Level 1 and Level 2 qualifications before setting up their own bookkeeping practice, adding to further qualifications as they progress their career in bookkeeping.
Pyman became a bookkeeper by studying qualifications through the Institute of Certified Bookkeepers (ICB). She says: “They [the ICB], provide you with your practice license, membership number and advise on what else is required to set up a practice.
“This covers AML [anti-money laundering], policies and procedures, insurance, logos, templates.
“Initially I was based at home and acquired my first clients through local networking groups and accounting connections from when I had been in commercial banking. I now have an office and a couple of members of staff.”
Pyman is also a qualified Associate of The Institute of Certified Bookkeepers and has a Level 1 and Level 2 certification in Manual and Computerised Bookkeeping.
If you’ve always wanted to be a certified bookkeeper – and that’s your ultimate aim – there are options to do so by studying for the relevant certificate and diploma courses through accredited providers such the ICB. But you don’t need to be certified to become a bookkeeper.
Adams from Papertrail Bookkeeping says: “Becoming a certified bookkeeper shows that you have trained and have appropriate qualifications in place to prove your skills.
“Once you pass the exams, you can apply for a practice license through organisations such as ICB. You need insurance in place, and must ensure you’re complying with current anti-money laundering regulations.
“I know legislation is being tightened up, so it may well be that you need to have completed the qualifications to run your own business in the near future.”
The AAT also has a range of bookkeeping qualifications with the highest certificate allowing you to become an AAT licensed bookkeeper. The highest certificate will allow you to use the letters AATQB (as you’re an AA bookkeeping member) after your name.
Rules and regulations to comply with
After passing your exams and obtaining your qualifications, the next step is to comply with a series of rules and regulations.
They include registering with the ICB (you can be fined if you don’t), applying for a practice licence, complying with money laundering regulations and complying with professional conduct regulations.
The reason why you need to comply with money laundering regulations is that as a bookkeeper, you need to satisfy a legal requirement to spot and reduce the risk of your clients laundering money.
With regard to professional conduct regulations, these are set out so you can follow basic principles for ethical and professional conduct.
The regulations also set out your ongoing duties to the ICB and the disciplinary process that is used if a member breaches the regulations.
Get insurance so you’re protected
You’ll need bookkeeping insurance as you’re providing an essential service for businesses. Mistakes can happen. Professional Indemnity Insurance protects you against claims made by unhappy clients and your employees.
It will protect your financial interests, help minimise disruption to your business, pay your fees if an unhappy client refuses to pay you, and cover the costs of rectifying a mistake.
You can also take out Public Liability Insurance, which covers you against claims from third parties for personal injury, or property damage.
Setting up your business
After passing your exams, registering with the ICB, buying insurance and observing all the rules and regulations, you’re now ready to start up your own bookkeeping business.
You’ll need to register as self-employed with HMRC unless you are setting up a limited company.
Then you’ll need to decide whether you want to work from home or in an office. There are likely to be more costs associated with setting up in an office space, with rental costs being one expense to consider.
If you’re setting up at home, make sure you have a designated working area – you could turn a spare room into an office space, for example, or perhaps start at the kitchen table – and somewhere that you can store your clients’ paperwork.
Then there are the practical aspects to consider, including buying a computer or laptop, purchasing accounting software and business stationery, and setting up a business bank account.
Final thoughts on starting a bookkeeping business
Setting up your own bookkeeping business can be very rewarding, not only financially but as a lifestyle choice.
In addition to this, you’ll be providing an essential service to your clients, helping them to run their businesses smoothly and efficiently.
Editor’s note: This article was first published in September 2020 and has been updated for relevance.
Small business toolkit
Get your free guide, business plan template and cash flow forecast template to help you boss your business and achieve your goals.
Never miss an episode
Subscribe by email and get Sound Advice delivered to your inbox every two weeks with the Sage Advice newsletter with a ton of related articles, templates and problem solving guides for small businesses so you can put our sound advice into practice.
Ask the author a question or share your advice