Is it hard to start a bookkeeping business?
Many small business owners look to outsource managing their books.That is because it’s not something they enjoy or it’s something that they have no desire to learn. This is why starting a business as a bookkeeper for other small business owners can be an excellent business idea.
Small business bookkeepers can provide a range of services from managing accounts receivable, accounts payable, reconciliation, payroll, reporting, income tax preparation, and more.
You need experience with bookkeeping and/or accounting on a professional level, plus experience with various accounting software, such as QuickBooks. It’s also necessary to be extremely accurate, reliable and work with a high level of integrity when you’re managing the books for another company.
Although there are opportunities to buy a franchise bookkeeping business, there are compelling reasons to go out on your own and start one up from scratch. A bookkeeping business is based mainly around your knowledge of accounting and accounting software programs. Your success will also depend on how well you get on with people and how efficient and cost-effective you are, particularly if you are a virtual assistant.
If you are a people person and a hard worker you might find that you can pick up your first customers by word of mouth marketing with your friends. If you are interested in meeting other Sydney Bookkeepers visit our meetup page and explore the possibilities.
A bookkeeping business consists of managing income and expenses, processing payroll and preparing tax returns for business clients. Creating a business plan and learning how to get clients are a couple of examples of what you need to do to get up and running. If bookkeeping is just going to be a way to make some extra cash, you may be able to get away with skipping a few steps. We’ll point out these areas where appropriate.
You can’t expect to earn a living from bookkeeping unless you know how to bookkeep. If you want an in-depth idea of the principles of bookkeeping, then it’s a good idea to consult a training program or book on the topic, but here are some key aspects.
Double-entry bookkeeping is a way of accounting that ensures you do every transaction and formula twice to minimize the possibility of errors. If a firm buys something as a business expense, this needs to be recorded both as one asset (cash) being spent and another asset (the purchase) being obtained. Make sense?
You’ll also find yourself having to prepare general ledgers, or a record of each transaction the company makes – including the date, description, quantity, and price. This is almost always done using online bookkeeping software to make it easier.
Similarly, classifying business transactions is an important part of bookkeeping. Different classifications include profit-making, sales and expenses, investing, and financing activities.
There’s no need to panic if these concepts are completely new to you – everyone has to start somewhere, after all.
You’ll also need certain soft skills like accuracy, reliability, and organization. Since bookkeeping involves working with sensitive information and keeping it confidential, you’ll need to project yourself as a professional who they can trust.
Yet it’s not just about how good you are at your job and how professional you are. You also need to be likable. While working as a bookkeeper, you’ll often be sitting one-on-one with your clients – if you have zero social skills and they don’t enjoy spending time with you, they might find the experience uncomfortable and want to go elsewhere next time.
This doesn’t mean you have to put on a mega-extroverted, charismatic front if that’s not who you are. Listening to the problems of your customers and enjoying helping them will take a weight off their shoulders and show them you’re genuine and truly care.
Bond over the fact you’re both entrepreneurs and willing to do anything for your businesses.
These days most businesses work with some form of accounting software, so being familiar with these programs is a must. It’s tempting to learn how to use every single piece of accounting software out there, but in reality, quality is often better than quantity.
If you not only know how to use the program but also aim for an in-depth understanding, you can position yourself as an expert. Clients may be suspicious of somebody claiming to know how to use ten different programs. For this tactic to make sense, ensure you choose a popular piece of software!
QuickBooks is probably the biggest player on the market, and that is who we recommend you use for your business.
Become a Certified Bookkeeper
One of the fastest ways to gain credibility with potential clients is to prove that you have the credentials to do bookkeeping work. If you are a CPA, then you have already demonstrated that you possess the knowledge and skills to perform the duties required of a bookkeeper, and you can proceed to the second step.
However, if you have either formal education in the accounting/bookkeeping field or you have worked as a bookkeeper, then you should get certified before you start a bookkeeping business.
Steps to Become a Certified Bookkeeper
- Decide on business identity and trading name (may trade under your own name initially) – Prepare a Business Plan
- Register a Business Name – Register on ASIC
- Register for an ABN and GST – ABN Essentials, Register for GST
- Consider a corporate structure (Company either with or without a discretionary trust)
- Understand and consider the ATO view on starting a new business – ATO checklist for new business
- Understand and consider the ATO GST Checklist for Small Business – ATO GST Checklist for Small Business
- Decide on your charging policy (Result based or time-based) – Charge Rate Calculators
- Do some initial reading – Bookkeeping for Dummies, Bookkeeping education reference material
- Decide on which software platform(s) you will use and know – MYOB, Xero, Reckon, Saasu
- Obtain some initial training from the software companies (see above)
- Obtain your Certificate IV in Bookkeeping (including the BAS Agent skill set)
- Obtain ICB Student Membership (ICB Student Membership) – provided by your ICB Certificate IV Accredited Training Provider or RTO – ICB Accredited Training Providers
- Be certified by ICB through ICB’s Practical Bookkeeping Assessments
3.Commencing Business (May Occur While the Above Takes Place)
- Register your business (see above)
- Obtain Professional Indemnity (PI) Insurance
- Apply for ICB Membership at an appropriate level – ICB Membership levels explained, Apply online for ICB Membership
- Following obtaining at least one years bookkeeping experience, obtain a Practising Certificate from ICB
- If you are providing a BAS service, then you must register as a BAS Agent – What is a BAS Service, What can a bookkeeper do? What can a BAS Agent do?
- Understand and consider the “How to Engage with a Client” from ICB
4.Continuing to be Certified
- Maintain the above registrations and insurance
- Undertake the required CPE (Continuing Professional Education) each year
- Undertake the ICB Annual Skill Review assessment
Create a Business Plan
Unless this is just a part-time gig for you, writing a business plan is something that everyone should do before they actually start their business. While a business plan can definitely be used to obtain funding for your business, the value in going through the exercise of writing a business plan is all about the process.
During the business plan writing process, you are able to think about every aspect of your business, such as what products and services you will sell, how you will market those products and services, and who your competition is. You will also create a financial plan that should include a 12-month profit and loss projection, projected Cash Flow, and a projected Balance Sheet.
Here are the key items that should be included in every business plan:
- Cover Page
- Executive Summary
- Company Overview
- Competitive Analysis
- Marketing Plan
- Startup Costs
- Financial Projections
Incorporate Your Bookkeeping Business
Like starting any business, several administrative tasks must also be done before you can begin to servicing customers. This step is an important one because it establishes your business as a legitimate one. It also helps to limit your personal liability; if your company is ever sued, the only assets that could be taken away are the business assets, not your personal assets like your home or your personal bank accounts. Whether you are doing this part-time or full-time, you don’t want to skip this step.
Here is a checklist of what you need to do to establish your business at the local, state and federal levels:
Select a Business Name
Naming your business can be both a fun and stressful exercise. Your name must convey your brand since that is what a potential customer will see before they sit down with you for that initial consultation. You want to make sure that your business name says exactly what you do so that people don’t have to guess. This is not the time to be “cute” unless you can also accomplish “clarity” about what it is that you do at the same time.
Here are some great tips from business owners on how to name your business:
- Aim for clarity – Your name needs to tell people what you do.
- Use a term with an established brand – For example, you could use the name of the city where you are located.
- Get input from others – Ask family and friends for their input; make it fun, and put it out on your social media that you are looking for suggestions on what to name your business. Offer a prize to the winner.
- Test it out – Try it out on potential customers to see what they think. Compare your name to competitors names to see if it stands out enough (but not too much).
Select a Business Structure
There are four common business structures: sole proprietorship, partnership and corporation. The structure that you choose will determine your personal liability if the company is ever sued, your tax liability, and your ability to raise capital.
Set Up Business Operations for Your Bookkeeping Business
Now that you’ve incorporated your business, you can start setting up operations like getting the right insurance and opening a separate business checking account. It’s important to separate your business operations from your personal finances in order to take full advantage of the liability protection given to you during the incorporation process.
Where to Find Clients
There are many ways in which you can begin to find clients, although obviously none are guaranteed. The level of success you achieve will depend on some factors, including the area in which you live, the type of businesses that operate in your area and the general hourly rates for work of this type.
The first is obviously to advertise. Look at the classifieds section in your local newspapers. You will need to look at whether any other bookkeepers are advertising regularly. If there are, then you may find that you have more competition for your business, although this is not a bad thing, it just means that you will need to sell yourself, and your professionalism, better than the others. Adverts from competitors will also give you some idea of the type of services they offer and perhaps even the ‘going rate’ for your area. Undercutting does not always work. After all, businesses need their books done properly.
How Much to Charge
The most difficult part of starting any business is deciding how much to charge. This depends on a number of factors, including your experience, locality, the availability of other bookkeepers in your area and the current financial position of your client. We suggest that you should start by charging between $45 and $55 per hour for most bookkeeping services. In some areas of the country, it is difficult to reach $30 per hour, and some clients expect to pay no more than $25. However, remember you are offering a professional service and should be paid accordingly. Many consulting, troubleshooting or problem resolution services should be charged at up to $100 per hour.
The Pros of Starting a Bookkeeping Business
If you have those characteristics under your belt, here are some of the benefits of starting a bookkeeping business:
- Startup costs for a bookkeeping business are minimal.
- You can become a specialist in one accounting application for increased marketability.
- It’s consistent work that typically takes place on a regular schedule.
- You can work virtually and broaden your target market.
- There aren’t formal certifications or training necessary (although, it’s never a bad idea to become certified).
The Cons of Starting a Bookkeeping Business
Some of the potential challenges you may face if you start a bookkeeping business include:
- There could be significant liability issues.
- You need to take measures to ensure all client data is kept secure.
- It could be expensive to purchase and update various accounting software.
- You need to be comfortable with technology so you can access a client’s computer, if necessary.
Please remember that taking on your first client can seem very daunting. You may inherit a perfect set of books – but it is more likely to be a shoebox crammed full of receipts and bills. Many businesses let their books get on top of them before they look for a bookkeeper. A final reminder from the ATO prompts some. But don’t panic! The Institute is always here to help, and it is worth remembering that if everyone were good at doing their own books, there would be no need for your services.
Starting a bookkeeping business is going to take a lot of effort, but the barriers to entry have never been lower. There are great tools to work with, and there are plenty of people to support you. Bookkeepers have an awesome community.
Now that we’ve provided you with a roadmap to get your bookkeeping business started, I want to challenge you to take your calendar out and pick a date (be realistic) for when you would like to be ready to take that first client. Once you do that, consider this guide and start putting a weekly to-do list together based on the steps we have shared with you.