How To Start a Bookkeeping Business
We live in unprecedented times, and starting a new business may sound like a risky proposition. More than 10 million Americans remain unemployed, and the COVID-19 pandemic closed 23% of small and medium businesses at its peak.
But amid the economic meltdown and the subsequent signs of recovery, an increasing number of businesses need accounting firms to help them keep their operations on track, manage loans, and identify potential sources of revenue.
If you’re trying to figure out how to start a bookkeeping business, you’re probably not alone. According to at least one survey, accountants are busier than ever, with 69% experiencing a higher than usual workload. So, if you’ve found the perseverance to launch your small business, check out the bookkeeping basics below, which will help you develop the right strategies and give you the confidence to move forward.
What Do Bookkeepers Do?
Contrary to popular belief, the leaders of the accounting profession aren’t a bunch of gray-haired men who are sitting around crunching numbers all day. Starting a bookkeeping business can pave the way for a modern, innovative, and creative job that involves keeping and interpreting financial records.
In addition, accountants are tasked with ensuring compliance with local laws, preparing tax returns, managing income and expenses, processing payroll, and dealing with a broad range of other paperwork. Of course, some businesses don’t need this level of assistance and prefer to go with virtual bookkeeping services.
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.
Checklist for Starting a Bookkeeping Business
We’ll take you through our step-by-step guide with tips and tricks on how to do bookkeeping. Get ready for a detailed lowdown on each and every move you need to make in order to kick things off successfully and land your first client.
1. Get your certification
The first step is getting your credentials. Although having a bookkeeping license is not a must for doing this job, many bookkeepers choose to get certified to gain credibility with clients and charge more for their services.
While you’re figuring out how to start a small bookkeeping business, the certification process should be at the top of your list. Having a certificate can be a game-changer in the bookkeeping business. You can become a certified public bookkeeper through a number of organizations, including the American Institute of Professional Bookkeepers and the National Association of Certified Public Bookkeepers.
AIPB is a more suitable option for those without a formal education in bookkeeping and accounting. You can get certified once you meet the 3000-hour work experience requirement and pass a certification exam. Meanwhile, CPB requires proof of a degree in accounting, and you’ll also need to pass an exam to get the credentials.
2. Create a bookkeeping business plan
Every business needs a long-term vision, and the business of bookkeeping is no exception. But before you can reach your long-term goals, you’ll need to outline your strategy and identify every significant aspect of your business. Here’s a roadmap for your business plan:
- Before you start thinking about a bookkeeping business launch, make sure you have a timeline of all the key milestones.
- Analyze your market, the level of demand for your services, and the competition.
- Hammer out all the start-up costs and financial projections for your bookkeeping business.
- Create a straightforward management structure.
3. Incorporate your business
Now let’s deal with daunting administrative tasks that will make your business legal. First, select a catchy name that conveys your brand and clearly states what you do. Next, get insurance to protect your firm from potential threats, set up a mailing address that you plan to use with your clients, and open an account with a bank that offers favorable terms for small businesses.
While you’re working out how to start a bookkeeping business, bear in mind that the structure of your company impacts everything from your earrings to your taxes and your personal liability. The four most common structures are sole proprietorship, partnership, limited liability company, and corporation.
4. Choose the accounting software
Tracking your clients’ finances and creating financial reports can be exhausting if you’re doing everything manually. Thanks to modern-day technological advances, we can lean on accounting software to make our lives easier. If you’re starting from scratch and working on a budget, there are a number of free accounting software options that can help you with your bookkeeping business.
On the other hand, many of the businesses that prefer the paid option choose the QuickBooks bookkeeping software. Tailored to small and medium-sized businesses, the software can help customize your invoices, track expenses, and manage reports. This cloud-based program allows you to store information and forget about piles of paperwork on your desk.
5. Offer your services to the world
Once you’ve identified your target market, you’ll want to deliver a service with all the bells and whistles. Focus on services that are valuable to your potential clients. Think about designating your services in different tiers and offering different pricing plans.
Those navigating the ins and outs of how to start a bookkeeping business need to focus on making their services both reliable and affordable. Make a list of your core offerings: monthly bookkeeping, financial statement preparation, invoicing, sales, tax filings, and catalog the prices. Now, it’s time to tell the world about it.
6. Spread the word
The next step is implementing marketing strategies. Whether you’re offering bookkeeping services from home or your office, make sure people know about you. Business cards and a website with SEO-optimized content are not enough these days. Starting a bookkeeping business isn’t difficult, but staying in the game requires going the extra mile.
If you want to know how to start bookkeeping for a small business, you need to think outside the box and start diversifying your approach. Think about hiring a marketing company that can help you brand your services and come up with advertising strategies. Coming up with a unique logo can also play an important role in developing your identity. Additionally, you can advertise your services on social networking sites, start a blog, hit up local networking events, and mix business with pleasure.
7. Stay up to date
All these tips and tricks on how to start a bookkeeping and tax business won’t work if you stop there. It’s important to make connections with other people in your profession and never stop learning. In addition to numerous online courses that help you stay in the loop, you can also take some time to attend summits and conferences that are ideal for speed networking, panel discussions, and having some fun. If you work from home, bookkeeping can become a bit redundant, so taking part in social gatherings and mingling with other entrepreneurs can be extremely useful.
How to Start a Home-Based Bookkeeping Business
Renting an office when you’re starting from scratch might be costly. To keep the costs down, you can set up an office at home. Meetings with clients can be scheduled online, especially during the pandemic when virtual bookkeeping is becoming increasingly popular.
Arm yourself with a cloud-based accounting platform and make sure to have credentials because clients are less likely to put their trust in home-based bookkeeping agencies. Now that you’re up and running, spread the word about your online bookkeeping services and wait for your dream clients.
How to Start a Freelance Bookkeeping Business
Hiring freelance bookkeepers is becoming increasingly popular among small businesses trying to cut costs. As a freelancer, you’ll also need to purchase bookkeeping and payroll software and preferably have a PC with robust features.
Now let’s talk about money. Freelancers have to pay their own taxes for their bookkeeping business. It’s important to keep that in mind when you set your rates and offer your services.
After starting your online bookkeeping business, you should join freelancing platforms such as Upwork, Guru, or Toptal. Keep an eye out for job offers, and never stop learning through webinars, online panel discussions, and courses.
It depends on the type of bookkeeping services that are being offered. For basic services, the cost can range anywhere between $10 and $35. More senior bookkeepers who have some accounting skills can charge between $40 and $75, while those offering bookkeeping and accounting services can charge more than $150.
Start by creating a business plan, structuring your business, and incorporating it. You’ll gain more credibility with your clients if you get certified. Once you’re done with the administrative side, purchase cloud-based accounting software and start marketing your services online.
Even though the economy has been hard-hit by the pandemic, accountants are in high demand, and running a bookkeeping business can still be profitable. It’s currently one of the 15 most profitable and lucrative small businesses. That’s probably why you’re asking yourself how to start a bookkeeping business?
The average hourly rate for bookkeepers in the US is between $18 and $23. Ultimately, the rate depends on experience, education, and certification. The price also varies depending on the type of the contract: full-time, part-time, or freelancer. Lastly, outsourced bookkeepers charge around $99 per month.
Things are different when it comes to self-employed/independent bookkeepers, considering the self-employment tax they are obliged to pay. Their average earnings per hour range between $30 and $63.
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