How to Start a Bookkeeping Business

How to start a bookkeeping business (photo: www.govdocfiling.com)

Despite the evolving nature of business, the demand for bookkeeping remains constant. Bookkeepers play a crucial role in the success of other businesses by ensuring accurate financial tracking and promoting growth.

This guide provides a comprehensive overview of how to establish a bookkeeping business, covering everything from the initial setup to determining pricing for your services, identifying potential clients, and securing funding if necessary.

What does a bookkeeper do?

photo: www.nichepursuits.com

A bookkeeper plays an essential role in any business operation. They are hired by a company to manage and organize its finances, which includes recording and categorizing all transactions. Bookkeepers assist small-business owners in keeping track of their cash flow, which is a critical indicator of a healthy business. Additionally, they often help businesses create important financial statements like profit and loss statements and balance sheets.

It's important to note that bookkeepers differ from accountants as they cannot file taxes or perform audits like certified public accountants. Bookkeepers also do not need to have an accounting degree, although they can receive certifications through training programs. Some bookkeepers gain experience on the job to start their own bookkeeping businesses.

Typical bookkeeping services involve managing a business's finances using accounting software, handling accounts payable and receivable, providing an overview of a business's financial habits, and generating financial statements.

Read More: How Many Jobs are Available in Real Estate Investment

How to start a bookkeeping business in 8 steps

photo: proteafinancial.com

Starting a bookkeeping business is not a difficult task. Here are eight steps to follow to launch your bookkeeping business quickly.

1. Choose Your Target Market and Specialization

Bookkeeping services are needed across various industries, as every business needs to manage their finances efficiently. However, to stand out from competitors and promote your business, you may choose to specialize in a particular industry.

Specializing in a specific industry can help you build credibility in that area and improve your skills. It also makes it easier to identify your target audience. To determine your niche, research the market to find out which bookkeeping businesses are already established and which industries they serve.

2. Create a Business Plan

All business owners, including bookkeepers, should write a business plan regardless of the type of business they operate.

A business plan is a detailed outline of your company's plans, including your services, target market, and competitive advantage. The plan should also include projections and plans for your business growth. Although the document may be lengthy, it is crucial to create one to help you focus your business and operate efficiently from the start.

When creating a business plan for your bookkeeping business, there are two essential elements that require extra consideration:

- Choose a Business Name

Your business name will be the first impression potential clients have of your business. Therefore, it's essential to choose a name carefully. Consider what you want to communicate through your business name, such as your expertise, personality, or specialization.

Before finalizing a name, check that it isn't already in use by someone else to avoid confusion. It's also a good idea to run the name by a few people to gauge their impression of it. Finally, run the name through your state's business name database to ensure its availability.

- Consider Certification

Although it's not mandatory to be certified to run a bookkeeping business, you may want to consider becoming a certified public bookkeeper (CPB). Obtaining a CPB certification signals to clients that you possess professional-level skills, which can help differentiate you in a competitive market.

Some software products also offer certification programs. For example, you can become certified in QuickBooks.

3. Register your business and get insured

After selecting a business name, the next step is to register your business and make it official. The registration process will vary depending on your business's structure and location. You can find specific guidelines for registering your business with your state's Secretary of State's office.

- Select a Business Entity

Choosing a business entity is a crucial part of the registration process. It determines how you pay taxes as a small-business owner, your liability protection, and your business structure. If you're starting a bookkeeping business solo, consider researching sole proprietorships and LLCs as potential options. An LLC may be a good choice if you plan to expand your business in the future.

- Obtain Insurance

As a bookkeeper, you'll be handling sensitive financial information, making it essential to obtain insurance to protect your business in case of errors or omissions. Consider obtaining professional liability insurance or errors and omissions insurance to protect your business from potential lawsuits.

4. Choose your bookkeeping software

Selecting the appropriate bookkeeping software is a crucial decision for your business. With numerous options available, it's essential to do your research and consider each one carefully.

If you find yourself feeling overwhelmed by the many options available or prefer to use a widely-used software, QuickBooks Online may be the right choice for you. It's one of the most popular accounting software providers, utilized by both small and large businesses. Another well-known option is Xero, but there are numerous bookkeeping applications available to suit your needs. Obtaining certification in these programs can not only enhance your skills as a user but also promote yourself as an expert in the field.

Read More: Highest Paying Jobs in the World for 2023

5. Set up your business infrastructure

When starting a bookkeeping business, it's important to set up the necessary infrastructure to effectively manage your clients and promote your services. Here are a few key pieces to consider:

- Website 

A website is an important tool for attracting potential clients and showcasing your skills and experience. If you plan on running a virtual business, having a website is even more crucial. Luckily, there are many website builders available to help you create a professional-looking site.

- Client database management 

As your client list grows, it's important to have a system for organizing and tracking their information. You can use a CRM (customer relationship management) tool or project management software to create a workflow that works for you. There are also specific accounting practice management software options available, some of which integrate directly with popular bookkeeping software like QuickBooks Online.

- File-sharing

If your clients need to send you documents like receipts or statements, it's important to have a reliable file-sharing tool in place. One popular option is Dropbox, which allows you to create a shared folder that you and your clients can access. This can help streamline the process of exchanging documents and make it easier to keep track of important information.

- business bank account

To ensure proper organization of your finances and personal liability protection, it's essential to open a business bank account that is separate from your personal account. You can start by opening a business checking account and later on, consider a business savings account to earn interest on your funds. There are various options available for banking, including traditional banks and online institutions, so it's recommended to explore them before deciding where to establish your business account.

6. Price your services

Determining the appropriate pricing for your services can be the biggest challenge for any small business owner. If you charge too little, you may not be adequately compensated for your work, while charging too much can make it difficult to compete with other bookkeeping businesses.

According to PayScale, a website that monitors salaries and rates, the average hourly rate for a bookkeeper is approximately $17 per hour, ranging from $10 to $24 per hour. You may also want to consider checking out freelance and contract websites like UpWork or Fiverr to see what rates others are charging. Look for bookkeepers who have similar skill sets and experience to get an idea of what you should charge.

Keep in mind that the amount you charge should be based on factors such as your years of experience, industry specialization, certifications, and location. Also, remember that your rate is not fixed and can be adjusted if you feel that you are not pricing your services correctly.

7. Find your customers

Regardless of the type of business you own, marketing is crucial. The most effective small-business marketers are those who identify their target customers and promote their products or services directly to them.

To attract customers, you should create a unique selling proposition for your business. For example, you could emphasize your experience, industry specialization, or focus on local business. This will help you develop innovative marketing strategies such as direct mail or radio ads, social media ads, email campaigns, or other methods.

Consult our comprehensive guide to small-business marketing, which covers how to use SEO, search ads, social media, and other channels to reach your target audience.

Also, don't underestimate the power of word-of-mouth referrals. Don't be hesitant to ask your satisfied customers to spread the word about your business.

8. Understand your funding options

If you're starting a small business, you may not require a significant amount of funding at first. You can explore financing options later on if you expand your operations, such as opening a physical office or hiring additional employees.

At this stage, you may want to consider obtaining a business credit card to finance your bookkeeping business. This will provide you with the financial flexibility to establish your company and consolidate all of your business expenses in one place. This is not only beneficial for separating your personal and business finances but also makes it easier to manage your bookkeeping during tax season.

There are various types of business credit cards to choose from, including those with 0% introductory APR periods. If you have some initial expenses that you can't cover with savings, you can use this type of card as an interest-free loan. However, it's important to have a repayment plan in place before the introductory offer expires and a variable APR is implemented.

In conclusion

photo: proteafinancial.com

It's important to ensure that your bookkeeping business grows alongside other businesses in your area. This doesn't necessarily mean that you need to take on more clients, but rather expand your knowledge and network.

To achieve this, it's crucial to stay current with the latest skills and advancements in your preferred platforms. Attend professional events such as conferences and networking sessions to stay up-to-date with the latest trends and developments. Remember, investing in your business also means investing in yourself.

Read More: Largest Companies in the Finance Field

Source: https://www.nerdwallet.com