Bookkeeping is an essential part of every business. Professionals in these positions don several hats to maintain accurate financial records – tracking income and expenditure, processing payroll and payment deposits, preparing bills and invoices, maintaining an annual budget, preparing year-end tax and VAT returns, generating financial statements, and more. Smaller companies often find it difficult to manage all these tasks in-house, which is why they turn to bookkeeping businesses to help them.
How to start a bookkeeping business
1. Create a business plan
The first step in starting any business is to create a business plan. This plan works as a guide for one’s success and growth in the industry and outlines the services one intends to offer, the target market, and the pricing strategy.
Generally, business plans are broken down into sections such as executive summary (the purpose and goals of the company), business overview and structural planning, market research and industry trend analysis, competitive analysis and gaps in the market, marketing strategies, an operations plan, and a breakdown of the financial plan. Those seeking investors may also be interested in adding more information about their own experience in the field.
Determine the company structure here as well. Entrepreneurs can choose from among four main structures – sole proprietorship, limited liability company (LLC), partnership, and corporation – depending on their business goals and risk-taking abilities.
2. Earn the required certifications
While it is possible to start a bookkeeping business with no prior business experience, one does need to have relevant training and work experience in the field of accounting.
Certifications can be earned from one of the following institutes:
- American Institute of Professional Bookkeepers (AIPB): Earning this certificate allows individuals to use the abbreviation CB (Certified Bookkeeper) along with their name. It requires one to complete 3,000 hours of work and clear the AIPB examination. It’s ideal for those with no prior experience in bookkeeping.
- National Association of Certified Public Bookkeepers (NACPB): This certification requires individuals to undergo courses like QuickBooks, payroll, accounting, and bookkeeping. Upon passing the exam, individuals can add the abbreviation CPB (Certified Professional Bookkeeper) after their names. At least one year of work experience is required to qualify for this certification.
Apart from these professional certifications, it is also a good idea to earn software certifications before starting a bookkeeping business. This choice will largely depend on what software the business will use in the future. Some popular bookkeeping programs are offered by QuickBooks, FreshBooks, and Xero.
3. Consider the finances
Surprisingly, starting a bookkeeping business does not require a lot of capital at all. At the onset, entrepreneurs must account for costs like the business license, insurance, certifications, computer, high-speed internet, software, and initial marketing materials (business cards, brochures, etc.). Considering these costs, a single-person (or a freelance) bookkeeping business can take off with as little as $1500-$2000.
4. Get insurance
Every business must get a quality insurance policy to ensure they are covered in case of any issues. Insurance may be of various types:
- General liability insurance: Covers against claims from third parties for personal injury or property damage
- Workers’ compensation insurance: Provides coverage for any injuries or accidents in the workplace.
- Business property insurance: Covers property loss, theft, or damage in many cases
- Professional liability insurance: In the event of mistakes, this can help protect the business against claims made by unhappy clients or employees
- Business owner’s policy: This is a comprehensive coverage plan that includes general liability, business property, and commercial auto insurance
5. Complete the paperwork
It’s impossible to start a legal business without completing all the necessary paperwork. Ensure that the business is registered with the appropriate authorities, and apply for an Employee Identification Number (EIN). This number is issued by the IRS and is extremely important when hiring employees, filing taxes, applying for licenses or loans, and building the business credit.
Business owners must also apply for any licenses or permits that are required in their state. These requirements vary significantly from state to state. Be sure to open a different bank account and apply for a separate card for the business to keep a distinct line between personal and professional expenses.
6. Marketing and expansion
Businesses that are looking to hire and expand right away will also need to send in necessary forms like the W-4 and the W-9 to the Department of Labor. Details regarding these forms and other necessary documents can be found on the federal website.
The ultimate goal of any business is to acquire new clients and grow. To make it happen, the business owner must create and execute a marketing plan. Before designing this plan, it is important to understand the target customer, their mode of interaction with the business, marketing channels, and the business’s unique selling proposition.
Based on these factors, the entrepreneur will then have to set up a business website, which will contain all the necessary information about the business. For those looking to run a virtual or online bookkeeping business, investing in social media and email marketing will also be worthwhile.
Setting up a new business can be rather difficult, but it is an extremely rewarding effort. Given the importance of bookkeeping in virtually every industry, entrepreneurs are sure to find success in this field. The earning potential will also increase as one gains more experience, improves the quality of their services, and establishes themselves in the market.