Bookkeeping Business

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 an excellent 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 interchangeably, 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:

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 upfront.”

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 essential 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 to employ staff, turnover and success?

It’s essential to do your research before starting 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 American Institute of Professional Bookkeepers is the best place to start.

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

These certifications are recognised industry-wide and cover everything from understanding business documents, managing books, posting and making entries, 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 familiarise themselves with the Financial Accounting Standards Board’s Accounting Standards Codification, including guidelines for recording specific transactions.

Additionally, bookkeepers must follow document retention standards. An audit can happen to any client, so to help auditors and the IRS, well-kept records and records kept for the allotted 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 minimise disruption to your business, pay your fees if an unhappy client refuses to pay you, and cover the costs of rectifying a mistake.

You are setting up your business.

After passing your exams,  buying insurance and observing all the rules and regulations, you’re now ready to start 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 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 provide an essential service to your clients, helping them run their businesses smoothly and efficiently.

How Bad Bookkeeping Advice Can Destroy Your Business (And What To Do Instead)

Are you the victim of lousy bookkeeping advice?

If so, don’t feel bad. Everyone has heard something like this from a loved one or even a supposedly professional bookkeeper:

“Don’t worry about it; your credit card and bank statement have all the information for your business.”

In case it isn’t clear:

Advice like this is terrible. Bad.

According to ATO assistant commissioner Kath Anderson: “Quite often it’s well-intentioned family and friends. We hear of people being down the pub and hearing what their mates and colleagues claim”

If you’ve followed advice like this, it’s essential to start with forgiving yourself first. Then forgive those who don’t know any better.

After all, even with the best intentions, these people do not realise that their lousy bookkeeping tips and tricks put your wealth at risk.

But wait – there’s more lousy bookkeeping advice you need to be aware of and avoid.

For example, there’s the myth of using your bank statements instead of proper receipts. Banks have even circulated this myth as a selling point at their branches. Fortunately, they were forced to stop.

And for the record, let me tell it to you straight:

A bank statement is never enough to substantiate your business expenses. You always need proper tax invoices and tax receipts for all business-related expenses.

Deakin University Associate Professor Adrian Raftery puts it like this:

“If you don’t have receipts and are fudging it… you are flouting the rules.”

Again, if you’re guilty of following this myth, start with forgiveness. And then change your ways – quick.

Yes, life for most business owners is hard, but the law is the law. And even if the most challenging part involves turning away from the wrong advice and false opinions are given by loved ones, you’re ultimately the one responsible for your business.

But again, it’s not just family. Far from it…

Even some tax professionals out there are leading good business people astray.

Yes, you read that right.

The Speed Of Government Retribution When Business Owners Break Tax Laws

And you don’t have to take it from me. Here’s what ATO assistant commissioner Kath Anderson said in her interview for Fairfax:

“There are some people who need further education, even in the agent population… Where we see a large claim that looks inaccurate, we take action on that straight away.”

Action? Audit? Will you be next?

Here’s an even more critical question:

Are your books in order? Do you keep all your receipts and invoices, so they don’t fade?

The Shocking Truth About Storing Your Receipts Improperly

Thermal receipts become unreadable within few months to a year. And you cannot use fading as an excuse anymore, as all modern accounting software allowing you to store the receipts electronically (e.g. photos, scans, PDFs).

Storing your financial documents in shoeboxes also doesn’t cut it. Even a decent spreadsheet leaves your information far too vulnerable.

Every year, the Australian Taxation Office significantly increasing its investigation by implementing new technologies and algorithms. If you were flying under the radar this past year, would you avoid swift action for the coming tax year?

Your answer should be a resounding, “No!”

Here’s why:

In 2017, the ATO conducted around 450,000 audits and reviews. These investigations resulted in nearly $1 billion in adjustments and more than 1300 prosecutions. Some people paid penalties of up to $360,000 and even served time in prison.

How To Avoid Stiff Tax Penalties And Sleep Easy At Night

Keeping your books in order is required by legislation. But what exactly does that mean?

For starters, it means that you must store all supporting documentation for five years. Payroll comes with an additional requirement that business owners keep their records for seven years.

There are more details to cover, but get this:

We are making it as easy as possible for our clients. Here’s what you get when you choose to have your bookkeeping covered by us:

  • Fully automated accounts receivables. This service allows you to see every day how much money clients owe to you and how much profit you have made. Half done integrations through unsupervised clearing accounts are only creating a mess. Our bookkeeping and Harli Processes are integrated into Xero and have been tested over multiple years.
  • Rerouting emails allows bookkeep system and Data Engineering Crew to catch payable bills on the fly. This process typically sorts 50% of your bookkeeping needs. We will also work with your suppliers to make this process as smooth as possible.
  • For all the little bits and pieces we offer all our clients a quick and easy to use iBookkeep App. This simple app allows you photograph every receipt you receive and send it to us with just a few taps on your mobile phone. We know that a lot of other companies are forcing their clients to take photo or scan of every single invoice. But unlike other companies, aVers offers processes that make photographing your receipts easy and even fun.

In sum, we place true control over your business and its bookkeeping back into your hands. We have completely replaced full-time bookkeepers with reliable best practice Accounts Management, Cash-Flow acceleration, and BAS services.

It is a great feeling knowing that should the ATO audit you record, your information is fully compliant and available at a click of a button.

So let me ask you this:

Would your business be able to survive an ATO audit or review? Or would you need the sell your family home to pay the adjustments or the fines?

For a peace of mind, call us now for an on-the-spot quote. We’d love to help you and your business rest at ease and avoid the damage caused by following bad bookkeeping advice we’ve seen destroy so many other entrepreneurs and business owners.

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