How to start a bookkeeping business

How to start a bookkeeping business

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In an effort to streamline operations and cut costs, many small business owners are outsourcing their administrative tasks to third-party firms. This trend creates ample opportunities to start a bookkeeping business. If you love numbers and helping people, this guide will show you how to start a bookkeeping business from the ground up.

What does a bookkeeper do?

Both large and small businesses rely on bookkeepers to keep tabs on the company's financial health. A certified bookkeeper can perform many basic bookkeeping tasks, including:

  • Using business accounting software to manage company finances
  • Managing accounts payable (AP) and accounts receivable (AP)
  • Generating financial statements (e.g., profit and loss statement, balance sheet)

Additionally, an experienced bookkeeper can help business owners gain a better understanding of their company's financial processes. Business owners can use this data to optimize financial performance and keep a close eye on their cash flow.

What is a bookkeeping business?

A bookkeeping company will offer basic bookkeeping services to another company or organization on a contractual basis. Most bookkeeping businesses provide ongoing financial support, though some companies will offer "catch-up" services for business owners that get a little behind in their books.

Small business owners don't usually have the resources to hire their own accounting or bookkeeping team. In fact, only 62% of small businesses have in-house accountants, which means that more than a third of small business owners turn to external companies to assist with bookkeeping and other financial services.

How a bookkeeper is different from an accountant 

Keep in mind that bookkeeping responsibilities are a bit different from those of a certified public accountant (CPA). Certified public accountants can file taxes, perform audits, and even provide professional guidance on the best way to manage company finances.

Is a bookkeeping business profitable?

Bookkeeping can be a surprisingly profitable business. That's partly because bookkeeping businesses don't have a lot of barriers to entry or even a lot of startup costs to worry about. All you really need is some bookkeeping experience, access to accounting software, and a way to market yourself to prospects.

More importantly, the demand is great. Without access to a certified bookkeeper, many small business owners could lose track of their cash flow. Starting a bookkeeping business will allow you to offer a valuable, in-demand service that the small business community rely on.

How to start a bookkeeping business in 9 steps:

Starting your own business may seem overwhelming, but the process is surprisingly manageable. Here's how to start a bookkeeping business in just nine simple steps.

1. Pick your market

Do you plan to target a particular business niche? If so, that can help your business distinguish itself from its competitors. For example, you may specialize in a particular industry or specialize in catch-up services for businesses that have fallen behind.

2. Write a business plan

Every new business will need a business plan. The US Small Business Administration offers tips on its website, but every business plan will include some basic pieces of information:

  • An executive summary highlighting the key points
  • A description of the services you plan to offer
  • An explanation of your competitive advantages
  • A summary of market research and your marketing strategy
  • A description of your leadership structure
  • Financial projections

While writing your business plan, you'll also want to come up with a business name. Select a business name that customers can easily associate with bookkeeping help and is different from your competitors.

Also, make sure that your business name hasn't already been taken. You can start by checking the United States Patent and Trademark Office (USPTO) to make sure that your desired business name is unique.

3. Certification for your bookkeeping business

Starting a bookkeeping business with no experience is technically possible. After all, bookkeepers don't have to have the education or credentials of a CPA.

But obtaining professional certification, such as becoming a certified public bookkeeper, can demonstrate that you have the professional skills to help other companies with their business finances. You can also become certified in using accounting software, such as QuickBooks Online.

4. Register your business and get insured

When starting your own bookkeeping business, you'll need to choose a business structure. What type of business entity will your company operate as? If you plan on working as a solo bookkeeper (freelance), you'll automatically be classified as a sole proprietorship. Otherwise, your business structure options are as follows:

  • A partnership
  • A limited liability company (LLC)
  • A corporation

While sole proprietorships are typically the easiest to manage, other business structure options can be helpful if you add employees as your business grows. Keep in mind that your choice of business entity will influence how you pay your taxes, as well as what type of liability protection you'll receive—if any.

Next, you'll need to invest in professional liability insurance, which protects you in the event you make an error in managing a client's books. You might also consider general liability insurance coverage to protect against a broad range of risks. And if you hire employees, you'll also need to invest in worker's compensation insurance.

5. Choose bookkeeping software

Choosing the right bookkeeping software is one of the most important steps in setting up a bookkeeping business. 

In addition to your accounting software, you might also consider other software to help you manage payables and receivables. For example, BILL offers tools that enable you to automate bookkeeping tasks and enable bill pay for all of your clients. BILL also integrates with many of the most popular accounting software providers.

6. Set up business infrastructure

Selecting your ERP software can be important first steps in establishing your business infrastructure. Bookkeeping firms should also consider establishing things such as:

A professional website

The front page of your website is the front door of your business. Having a clean, modern website will empower you to showcase your services. If you don't have a background in web development, don't worry. There are many great website builders available to help you design a website as unique as your business.

Client database management

Many businesses rely on customer relationship management (CRM) platforms to track bookkeeping clients or drop potential clients into a lead pipeline. You can use these platforms to nurture relationships with your clients. 

Some CRM systems even offer a customer portal to make it easier for you and your clients to communicate. The best systems even integrate with popular accounting and bookkeeping software so data is always within easy reach.

File sharing tools

Your CRM may already have this functionality built into the program. If not, you might consider using a file-sharing service such as Dropbox so you and your clients can exchange important data such as receipts or financial statements.

Business bank account

When starting a new bookkeeping business, it's vital that you keep your personal and business finances separate. Otherwise, this can create confusion during tax season and leave you on the hook for certain business expenses if your business fails. 

Open a business bank account as soon as possible. Many banks offer additional services that can help you maintain and scale your business operations, such as business credit cards, small business loans, and more.

7. Price your services

The cost of accounting and bookkeeping services can vary widely depending on your location. A little bit of competitive analysis can go a long way. Search for other bookkeeping businesses in your area, and investigate the rates they charge for their services. Make sure to compare rates of other bookkeepers who share your credentials and experience.

Bookkeeping services also tend to be ongoing, so consider offering discounts for clients who pay by the year. For example, you can charge a monthly rate for ongoing bookkeeping help and then offer a 10% discount for bookkeeping clients who pay a year in advance. This may help you attract prospective clients, as well as provide some much-needed cash flow as you're starting.

8. Find your customers

Now comes the fun part: landing your first client. To do this, you'll first have to determine your target market. If your bookkeeping business is targeting a particular industry, this can help you narrow down your list of potential clients.

Next, you'll have to create a marketing strategy to reach your target market. It costs nothing to create professional social media accounts on top channels, though bookkeepers may have better results on sites like LinkedIn to connect with business owners.

Content marketing is another great way to spread the word about your business. By using search engine optimization (SEO) best practices, you can generate blog posts and web content that use keyword phrases to boost your visibility in top search engines.

Is it hard to get bookkeeping clients? Not generally, especially with so many small businesses looking for low-cost solutions for their administrative needs. And if you occupy a niche specialty or focus on a particular industry, you'll stand out from the competition.

9. Research your funding options

To get your business off the ground, you'll need a plan for handling your estimated startup costs. If you have already opened a business bank account (see above), your provider may be able to connect you to funding options or a business credit card that can cover your basic business expenses.

Remember: avoid using personal finances for your business expenses. Keeping your business finances separate from your personal finances can protect you from liabilities and make life much easier during tax season.

Establishing your bookkeeping business 

Have you considered what type of business model you plan to pursue? The bookkeeping profession takes many forms, including virtual services and home-based businesses.

How to start a virtual bookkeeping business

You can launch an online bookkeeping business using the same process above, though naturally, you'll need to place greater emphasis on your web presence and your file-sharing tools. But you'll also be able to reach a wider market than if you only focused on your local area, reaching prospective clients from across the US.

How to start a bookkeeping business from home

Can you start a bookkeeping business from home? Yes. In fact, you can even deduct your home office space from your annual tax returns. This can be a great option for freelancers and online bookkeepers looking to keep their startup costs to a minimum.

Exactly how much does it cost to start a bookkeeping business? Depending on your business model, you may be able to start your own business for only a few hundred or a few thousand dollars. That's especially true if you rely on your home office and don't have to worry about hiring additional employees. Your only real costs will be your business/bookkeeping software and the initial costs of registering your business.

Checklist for starting a bookkeeping business

Ready to start your own bookkeeping business? Here's a helpful checklist to make sure you remember the essentials:

  • Pick your market
  • Write a business plan
  • Register your business name
  • Obtain certification and/or business license
  • Register your business
  • Get insured
  • Choose your bookkeeping software
  • Build a website
  • Invest in client management software
  • Select a file-sharing tool
  • Open a business bank account
  • Create a pricing structure
  • Develop a marketing plan
  • Research funding options

Following these steps makes it easier to get your new business off the ground.

Start a bookkeeping business using BILL

As a business owner, you'll find that life is only as easy as the tools you use. So why not start a bookkeeping business by using BILL? Join the thousands of accounting firms that are already using BILL to run their operations. Our innovative platform makes it easy to manage your own finances, and our centralized platform lets you manage every aspect of your operations from anywhere in the world.

The information provided on this page does not, and is not intended to constitute legal or financial advice and is for general informational purposes only. The content is provided "as-is"; no representations are made that the content is error free.