How to start a bookkeeping business: Top tips to help you succeed

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. Maybe you’ve worked as an in-house bookkeeper for a business and you’re ready to take the plunge for yourself.

Maybe you feel redundant and giving it a go alone allows 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, organized, 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.

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 money coming into and out of a business by maintaining accurate financial records.

Bookkeepers can help small and medium-sized enterprises (SMEs):

• Prepare for tax season.
• 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….and offer tax returns and payroll duties.

Claire Adams started her business Papertrail Bookkeeping after she left her job of 27 years.

She says: “We 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 [proprietors], and accounts/corporation tax returns for micro entity businesses.”

What does an accountant do?

There are numerous tasks 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?

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.

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 your clients’ finances and create financial reports, among 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 proprietors.
• 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 American Institute of Professional Bookkeepers.

You’ll find plenty of information about the bookkeeping profession on its website. For example, the professional certifications and qualifications people have to take in order to qualify as a bookkeeper.

These certifications are recognized 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.

Rules and regulations

After passing your exams and obtaining your certification, the next step is to comply with a series of rules and regulations.

The basis for financial reporting comes out of generally accepted accounting practices or GAAP. Bookkeepers should familiarize themselves with the Financial Accounting Standards Board’s Accounting Standards Codification, which includes guidelines for recording specific transactions.

Additionally, bookkeepers must follow document retention standards. An audit can happen to any client, so in order to help auditors and the IRS, well-kept records and records kept for the allotted time period are critical during an inspection. Bookkeepers could be met with financial fines or lose their ability to provide services if they don’t follow retention standards.

Get insurance

You’ll need bookkeeping insurance as you’re providing an essential service for businesses. Mistakes can happen. General liability insurance protects you against claims made by unhappy clients and your employees.

It will protect your financial interests, help minimize disruption to your business, pay your fees if an unhappy client refuses to pay you, and cover the costs of rectifying a mistake.

Setting up your business

After passing your exams,  buying insurance and observing all the rules and regulations, you’re now ready to start up your own bookkeeping business.

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, business stationery, and setting up a business bank account.

Conclusion 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.