Starting a Bookkeeping Business
If you're thinking of starting your own bookkeeping business, then this article shows you what's required to become a bookkeeper and be successful in the long run.
There are many opportunities to be successful producing accounts for small business owners in the UK. Either set up as a self-employed bookkeeper working from home providing services to your customers or work for a firm of accountants preparing books for their companies.
The history of bookkeeping comes from the term "bookkeeper" who is generally a person who keeps the "books" for an organisation or business.
In fact, the central system of manual double-entry bookkeeping was invented more than five hundred years ago by a Cistercian monk called Luca Pacioli. His bookkeeping system still survives today and used throughout the world.
Why use the term books? Before the advent of computers, each business would write down their figures in paper ledgers and keep records of their sales and expenses as they went along. The main books administered by companies were/ are:
- Sales ledger - lists all the invoices generated including when payments arrive. In larger companies, they have a credit control function to manage customer accounts which people often refer to the accounts receivable function.
- Purchase ledger - listing all the purchases made and when payment was made - in larger companies they may have purchasing departments who manage this function.
- Cash book/ ledger - shows the other half of the entries from above - it's effectively the companies bank statement but will have timing differences due to cheques issued but not yet cashed (for purchases) and cheques received for sales but not yet cashed.
- Asset book - listing all assets the company owns.
The data from these books or ledgers creates the foundation for the annual accounts for tax and company accounting purposes. The statements produced include a Profit and Loss Account a Balance Sheet and cash flow forecast. The tax and other non-cash related items such as depreciation get calculated when the accounts are drawn up. These are the bookkeeping basics every business owner must produce each year for tax purposes and to satisfy HMRC.
BookKeeping Training and Courses
The reality is you do not need any qualifications to be a bookkeeper.
In fact, sole trader accounts don't even need to be signed off by a qualified accountant for tax purposes.
But like most industries, you will need accounting knowledge, so a qualification from one of the principal accounting organisations is recommended.
There are many bookkeeping training courses available and tutorials online that can help although most people who start a booking keeping business are likely to be qualified accounts in one form or another. The recommended route for people thinking of starting in this arena look at the bookkeeping courses and training outlined below:
Association of Accounting Technician's (AAT)
The AAT qualification is the most basic for a qualified accountant although they can not sign off audited accounts. It's popular for people without any formal qualifications.
As an entry level to becoming an accountant, it provides some exemptions from the other more formal routes such as CIMA, ACCA and ICAEW. The AAT Accounting Qualification divides into three levels, Foundation / Certificate, Intermediate / Advanced Certificate and Technician / Diploma.
If you have relevant work experience or qualifications you may want to join at the Intermediate / Advanced Certificate level.
You can find out more about AAT at their website here.
Institute of Associated Bookkeepers (IAB)
The IAB is the largest bookkeeping institution in the world with over 150,000 students and members. It has various professional exams and qualifications that people take and represents the industry as a whole.
These qualifications are recognised and covers everything from understanding business documents, managing books and being able to post and make entries, managing credit control, recording ledger accounts and preparing trial balances and other statements. The diploma offers covers payroll management. You can see more at the IAB site here.
How to get started as a bookkeeper
If you have the knowledge and/ or qualifications then here's what you need to get started.
Your home office
You can start from home so long as you have enough space to take client paperwork and store it. Customers are likely to provide you with a carrier bag of papers, invoices, bank statements and other related items. It'll be your job to make sense of it and prepare the financial accounts from it.
Getting Client Paperwork
You'll need to have an easy method to get client paperwork from your customers. Prepare some form of checklist that they need to complete so you can get everything in one go. Perhaps this will be trial and error at the beginning with your first few customers. You can offer clients to email scanned statements to you, or you may have to collect them. Alternatively, of course, people can use courier services or drop them off at your premises.
As it's likely you'll need to meet your customers face to face, perhaps visit them at your initial meeting and collect the paperwork there and then.
Most businesses operating from home have minimal start-up costs, but you should investigate the types of insurance required - see below. Other costs may include:
- A computer of some description
- Back up hard disks
- Bookkeeping software to make life easier for you or at least an accounting software package that accountants endorse like Kashflow or Sage.
- A lot of printing paper
- Postage costs
- Storage cabinets
- Marketing costs to promote your services
- An additional telephone line and / or an answering service
Then it's just a case of your time invested in the business to prepare accounts.
You'll need insurance for your bookkeeping business as you're providing an essential service for small business owners and mistakes happen. It's best to insure against problems which could occur.
The professional associations can provide discounts so check with them otherwise search for the following:
Professional Indemnity Insurance (PI)
PI protects you against claims made by dissatisfied clients and employees of your business. PI insurance will protect your financial interests, help minimise disruption to your business, pay your fees if a dissatisfied client simply refuses to pay you, covers the costs of rectifying a mistake and protect you even if the claim against you is not valid.
Professional indemnity insurance also covers you for the dishonesty of your employees, partners or directors, defamation infringement of intellectual property rights, negligent misstatement or misrepresentation and loss of documents or data.
Public Liability Insurance (PL)
PL covers you for claims against you from third parties for personal injury, or property damage eg: an accident at work caused by someone tripping over a computer cable. It's not unknown for damages to reach six figures in public liability insurance cases and insurers sell cover based on the limit of liability the business needs.
Marketing Your Book Keeping Business
Perhaps the hardest part of any business is marketing to get a steady flow of customers, and this is no exception for bookkeeping businesses.
If you're starting from scratch, then here are a few ways to get those first customers.
New Business Start-ups
Bear in mind that existing businesses will usually have bookkeepers or accountants already so your success rate with these will be less so look for new business start-ups. You could partner with some of the company formation services to see the new businesses formed in your area, contact BNI or your local chambers of commerce but essentially any organisation that deals with startup businesses.
Small Growing Businesses
Many one-man-band businesses that start to grow may be looking for your services. Most sole traders are likely to prepare their books themselves but need someone to prepare accounts and get them to the inland revenue. So promote your services through the many online business forums and offer impartial advice to get recognised.
Obviously, you want local businesses to be your customers so think about where you can get in touch with them. The local builders, electricians, plumbers and other trades are easy to hunt down because they will be on customers' sites with their van clearly visible.
It's worth having a flyer with your services and contact details to simply hand to them. If they don't want it, ask them to pass it onto someone who could use their services. For your first customers offer a 15% discount (with a code they must quote) on your flyer - that way you'll attract new business but also know your flyers are working.
Member get member
Once you have a few customers, use the "member get member" technique to win more business. This marketing idea works by offering both your current customer and any customers they introduce a discount or bonus on the work you undertake. Think of a great offer then contact your existing customer base.
The worst thing you can do is sit at your desk waiting for the telephone to ring. Ask all your friends and family members to distribute your leaflets. Ask them to pass loads to others they may know and that way you'll get your marketing messages to as many as possible.
Best of luck developing your business and being a successful bookkeeper!