Bookkeeping Business

What Is A Bookkeeping Business?

A bookkeeping business provides the service of maintaining the daily finances of its clients. This service may include issuing customer invoices, creating financial statements and reports, payroll, paying and collecting debts and monthly bookkeeping of bank accounts. A bookkeeper is the one responsible for checking financial reports and figures for errors. It’s a safe way of keeping and interpreting financial records. In addition, accountants are responsible with ensuring compliance with local and national laws, preparing tax returns, managing income and expenses and processing payroll.

Before we delve any deeper into the bookkeeping business, it’s important to make a distinction between bookkeepers and accountants. These two terms are often used interchangeably, but there are subtle differences. While every accountant can perform the tasks of a bookkeeper, not all bookkeepers can be accountants. A bookkeeper will typically record daily financial transactions. On the other hand, an accounting business performs a broader range of tasks. Upon collecting and recording data, an accountant analyzes it. They need to be licensed, and they charge more for their services.

Many small business owners look to outsource managing their books. The want to focus on making the money and seek to find someone that can handle the paperworks. This is why starting a business as a bookkeeper can be an excellent business idea.

The term bookkeeping encompasses a broad range of services and add-on services. The responsibilities may vary depending on the company that you work for, but in general they include the following:

• Prepare tax returns
• Prepare invoices
• Payroll services
• Prepare budgets
• Balancing books
• Financial reports
• Reconciliation
• Reporting
• Income tax and self-employment tax preparation
• Tracking assets
  

Required Skills

Starting a bookkeeping business does require a set of skills. Here are some skills that will help make you a successful bookkeeper:

• Numeric skills. Accountants process large amounts of financial information while analysing and submitting financial statements. They monitor the financial transactions in a company. This requires you to be good with numbers and be able to handle large quantities of data with ease. 

• Attention. As a bookkeeper you handle important financial information, where every single detail is important. A minor error from your side can have consequences and cause penalties for the organisation you work for. To avoid this, attention to detail is an important skill to savour.

• Computer skills. As an bookkeeping expert you will typically complete all of your tasks using computers and software programs. Hence, having excellent computer skills will help you in achieving accuracy, productivity and efficiency. Also, you will have to run complex accounting software and other accounting tools for bookkeeping.

• Time management. This skill will allow them to manage your time efficiently and meet deadlines. When managing all financial activities within an organisation you need the ability prioritise tasks and deadlines.

• Detail-oriented. Since you are dealing with legal papers that may have major consequences for your clients, being detail-oriented is critical. When a business entrusts you with their finances, you need to repay them with expertise.

• Organized. As a bookkeeper you have to have the ability to organise the disorganized. Dealing with numbers all day you need to enjoy the process.

• Multi-tasking. As you will most likely need to handle the bookkeeping for several clients, multitasking skills and the ability to switch from client account to client account will be a requirement to become successful. 

• Communication. As a bookkeeper you will be presenting reports and statements to senior management. Good communication skills will help you present the information correctly and confidently.

• Hard worker. Building any business is difficult. There will be many long days and nights spent working in your business and on your business. You need to be ready and willing to put in the work necessary to grow your client base and deliver the required service.

• Discipline. As a business entrepreneur, it’s important to maintain discipline and professionalism. This ensures you are able to deliver on time and also maintain a professional work culture while working remotely.

• Integrity. It is important that a bookkeeper is ethical, transparent and compliant with all confidentiality agreements or other company policies. People are trusting you with all their financial and sensitive data. Hence, integrity is an important skill to possess and show your clients.

The Pros

Here are some of the benefits of starting a bookkeeping business:

• Demand is great as every business must do bookkeeping
• Startup costs are minimal
• You can become a specialist for increased marketability
• Work with your chosen clients
• Flexible Schedule
• The power to determine with whom you work
• Freedom to work wherever you want

The Cons

Here are some of the potential downsides to starting a bookkeeping business:

• There are seasons where you work 24/7
• The work can be dull
• There could be significant liability issues
• You need to ensure all client data is kept private
• Laws are ever-changing

How Much Money Can You Make?

The amount you can charge for your bookkeeping services depends on your level of skill and experience. For basic services, you can charge anywhere between $15 and $60. The average bookkeeper can expect to earn around $25 per hour. If you’re successful at building your business and attracting high-quality clients, you could easily build your portfolio and charge more. Ultimately, it all depends on education, certification and experience. The price will also vary depending on the type of the gig. Full-time rates pay different than part-time.

When you start a bookkeeping business, you need consider whether you are working to become self-employed and create work for yourself, or your aim is to hire employees and eventually create a self-sustaining business. The first option will limit your rate to your time in a day, while creating a business where you hire hire employees and expand your services, the earning potential will be unlimited.

The Start-up Costs

Here are some of the elements you will have to invest in to get started with a successful bookkeeping business:

• Computer
• Access to high-speed internet
• Bookkeeping software
• Business license
• Insurance

Write a Business Plan

Every business needs a long-term business plan, and the business of bookkeeping is no exception. Before you can reach your long-term goals, you’ll need to outline your strategy and identify every significant step to get to your goals. This is your business plan.

Writing a business plan is universal before starting any business. During the process of writing your business, you should think about every aspect of your business. Here are the key items that should be included in your business plan:

• Cover page
• Executive summary
• Company overview
• Marketing plan
• Startup costs
• Demand for your services
• Competition
• Financial projections
• Management structure
• Start-up costs
• Goals
  

Form a Business Entity

A business entity refers to how a business is legally organized to operate. This step is important because it establishes your business as legitimate. It may also help to limit your personal liability if your company is ever sued. Whether you are planning a part-time or full-time business model, you don’t want to skip this step. Go to your Secretary of State’s website and file for a company. The four most common structures are sole proprietorship, partnership, limited liability company, and corporation. Select a catchy name that conveys your brand and clearly states what you do. Bear in mind that the structure of your company impacts everything from your earrings to your taxes and your personal liability. The following is a checklist of what you need to do to establish your business:

• Business address
• Registered agent
• Business purpose
• Members/managers or directors/officers names and addresses

Get Your EIN and Register for Taxes

Nearly all LLCs and corporations will need to request a federal EIN (employer identification number) from the IRS. Whether you file corporate income taxes, have employees, or file certain franchise taxes, an EIN is required. The EIN is also a common requirement for opening a business bank account. An EIN is a unique, nine-digit number that identifies your business for tax purposes. It’s basically like your social security number for your business.

Open a Bank Account

Don’t miss this step. A business bank account keeps your business finances separate from your personal finances. Keeping separate finances is essential for maintaining liability protection. As I already mentioned, to open an account you will typically need to bring to the bank a copy of your company articles and the EIN.

Get Insurance

All bookkeeping businesses need insurance. These insurance costs can vary depending on where the business is located and the number of employees. The best thing to do is to request quotes from multiple providers and comparing those quotes. The most common insurances are as follows:

• Errors & omissions insurance
• Professional liability insurance
• General liability insurance 
• Commercial property insurance 
• Worker’s compensation insurance 
  

Your Bookkeeping Software

Some bookkeepers focus on one particular bookkeeping software, while others are more flexible. There are a lot of popular choices. Software like Quickbooks, Xero and Freshbooks. Fundamentally they all perform the same task. Hence, it may be worth at least familiarizing yourself with a few of them. Maybe you have already given some thought or made a decision about which accounting software to use for your business. The key here is creating an effortless bookkeeping accounting system. Creating an effortless accounting system will be imperative when it comes to building and expanding your client portfolio. 

Determining which software to use to manage all of the different aspects of your bookkeeping can be an overwhelming task. Some of the most common software providers offer a certification program so that bookkeepers can demonstrate that they are proficient with the software. These certifications are often free and even come with free bookkeeping software for your firm. 

Since most businesses use some form of bookkeeping software, being familiar with these programs is a must. This is where you can position yourself as an expert and ahead of competition. If you’re planning on specializing in a specific software, then I would advice you to obtain such a certificate. Potential clients will recognize the name and feel more safe in hiring you as their bookkeeper.

Get Your Certificate

Although having a bookkeeping license is not a must for starting your bookkeeping business, many bookkeepers choose to get certified to gain credibility with clients. This ultimately allows them to charge more for their services. The certification process should definitely be on your list. Having a certificate can be a game-changer in your bookkeeping business. You can become a certified public bookkeeper through a number of organizations. Look up the American Institute of Professional Bookkeepers and the National Association of Certified Public Bookkeepers. You can get your certificate once you meet the work hour experience requirement and you pass a certification exam.

Marketing Your Business

An important aspect of getting hired by clients is creating a portfolio that highlights your qualifications, strengths and skills as a bookkeeper. This is where you list your certifications. Highlight relevant abilities such as numerical ability, discipline, attention to detail, computer skills, time management and integrity. Mention all prior bookkeeping experience and the responsibilities you undertook.

Marketing is probably one of the most difficult things for bookkeepers to master. Consider a customized website for your business. In addition to a website, there are many other ways to market your business. Here are a few elements you can consider to improve your brand name in the bookkeeping business:

• A website you can send potential clients top
• Sign up with bookkeeper freelancer websites
• Join Facebook groups and pages for bookkeepers and accountants.
• Establish a client referral program
• Establish social media accounts
• Target a niche industry

Apply For Bookkeeping Gigs

Once you have achieved all the necessary qualifications and requirements, it is time to start applying for bookkeeping gigs. Many small businesses are looking for the right bookkeeper, so it’s really a matter of getting yourself out to the right people. Post on your social media that you’re a bookkeeper looking for clients. Ask everyone in network if they know anyone who has a small business that could use some help with their bookkeeping. Referrals are a game changer. You can also find job openings through online job portals, or directly apply through company pages. You can also use online posting sites such as Craig’s List or LinkedIn. There are really unlimited ways to market yourself and your business. The important thing here is that, you get started and follow through. Start with small businesses. Then go big.