How to Start a Bookkeeping Business: A Step-by-Step Guide

Introduction

Starting a bookkeeping business can be an exciting and rewarding venture. As a professional bookkeeper, you’ll provide clients with essential services that help them better manage their finances. You’ll have the opportunity to work with a variety of individuals and small businesses, developing close relationships with each of your clients. Plus, the demand for bookkeepers is expected to grow by 7% over the next decade—making now the perfect time to start a bookkeeping business.

Overview of Starting a Bookkeeping Business

Before you jump into the world of bookkeeping, it’s important to understand the basics of starting a bookkeeping business. This includes researching the profession, developing a business plan, choosing a business structure, obtaining licenses and permits, purchasing business insurance, securing financing and setting up accounting software.

Benefits of Joining the Profession

The benefits of entering the bookkeeping field are numerous. According to the U.S. Bureau of Labor Statistics, the median salary for bookkeepers was $40,240 in 2019—not to mention the potential for bonuses, commission and profit-sharing opportunities. Additionally, bookkeepers are often able to set their own hours and work remotely, giving them more freedom and flexibility than many other professions.

Research the Basics of Bookkeeping

Before you open a bookkeeping business, it’s important to do your research. Understanding the basics of bookkeeping will help ensure you’re offering the best possible service to your clients.

Understand What Bookkeeping Is and How It Works

Bookkeeping is the process of recording financial transactions such as sales, purchases and payments. Bookkeepers use accounting software to track and analyze these transactions, generating financial reports that help businesses make informed decisions. Bookkeepers may also be responsible for reconciling accounts, preparing taxes and providing advice on financial matters.

Become Familiar with Different Accounting Methods

Before you start a bookkeeping business, it’s important to familiarize yourself with different accounting methods. This includes understanding the differences between cash and accrual accounting, as well as knowing when to use each method. It’s also important to understand basic accounting principles such as double-entry bookkeeping and the matching principle.

Develop a Business Plan

Once you’ve done your research, it’s time to create a business plan. A comprehensive business plan will help you stay organized and focused as you launch your bookkeeping business. It should outline your objectives, services and pricing structure, as well as provide a clear mission statement.

Outline Your Objectives, Services and Pricing Structure

Your business plan should include a list of objectives, services and pricing structure. This will help you identify your target customers, determine the types of services you’ll offer and set competitive prices. It’s important to remember that every bookkeeping business is unique, so make sure to tailor your business plan to your specific goals and needs.

Develop a Clear Mission Statement

In addition to outlining your objectives, services and pricing structure, your business plan should include a clear mission statement. This statement should explain why your business exists and what you hope to accomplish. It should also reflect your values and the type of customer service you intend to provide.

Choose a Business Structure

When starting a bookkeeping business, it’s important to choose the right business structure. Each structure offers its own advantages and disadvantages, so it’s important to consider all of your options before making a decision. The most common business structures for bookkeeping businesses are sole proprietorships, partnerships and limited liability companies (LLCs).

Decide Whether to Set Up as a Sole Proprietorship, Partnership or LLC

A sole proprietorship is the simplest and least expensive business structure to set up. As a sole proprietor, you’ll be personally liable for all of your business’s debts and obligations. A partnership is similar to a sole proprietorship, but it allows two or more people to share ownership of the business. An LLC is a separate legal entity from its owners, which means the owners are not personally liable for the business’s debts and obligations.

Consider the Pros and Cons of Each Option

It’s important to carefully consider the pros and cons of each business structure before deciding which one is right for you. For example, a sole proprietorship is the easiest and least expensive option, but it doesn’t offer any personal liability protection. On the other hand, an LLC offers personal liability protection, but it requires more paperwork and is more expensive to set up.

Obtain Licenses & Permits

Depending on where you live, you may need to obtain certain licenses and permits from local, state and federal authorities. This could include a business license, tax identification number, professional license and more. It’s important to research the specific requirements for your area to make sure you’re in compliance with all applicable laws.

Apply for Any Necessary Licenses from Local, State and Federal Authorities

You may need to apply for several licenses and permits from local, state and federal authorities. These could include a business license, tax identification number, professional license and more. Research the specific requirements for your area to make sure you’re in compliance with all applicable laws.

Research Any Tax Implications for Your Business

In addition to obtaining the necessary licenses and permits, it’s important to research any tax implications for your business. This could include filing for an Employer Identification Number (EIN), setting up a payroll system and more. Make sure to consult a tax professional if you have any questions or concerns.

Purchase Business Insurance

Business insurance is an important part of running a bookkeeping business. It helps protect you from any unexpected events or liabilities that could arise. Depending on your specific needs, you may need to purchase general liability insurance, professional liability insurance, workers’ compensation insurance and more.

Get the Right Insurance Coverage for Your Business

It’s important to get the right insurance coverage for your business. This could include general liability insurance, professional liability insurance, workers’ compensation insurance and more. Make sure to research the different types of insurance available to you and find out what coverage is best for your business.

Find Out What Options are Available to You

There are a variety of insurance providers available, so it’s important to research your options and find the best fit for your business. Compare different policies to determine which one offers the best coverage at the most affordable price. You may also want to consider working with an insurance broker who can help you find the right policy for your business.

Secure Financing

Securing financing is an important step in starting a bookkeeping business. You may need to borrow money to cover startup costs such as equipment, software, office space and more. It’s important to research different financing options available to you and determine which one is best for your business.

Research Different Financing Options Available to You

When it comes to financing your bookkeeping business, there are a variety of options available. These could include bank loans, credit cards, home equity loans, crowdfunding and more. It’s important to research all of your options to determine which one is best for your business.

Determine Which Option is Best for Your Business

Once you’ve researched your financing options, it’s important to determine which one is best for your business. Consider factors such as interest rates, repayment terms and fees to make sure you’re getting the best deal. If you’re having trouble securing financing, you may want to consider working with a business advisor who can help you find the right financing solution for your business.

Set Up Accounting Software

Setting up accounting software is another important step in starting a bookkeeping business. Investing in quality software will help streamline your bookkeeping process, allowing you to quickly and accurately record financial transactions. It’s important to learn how to use the software to its full potential to maximize its efficiency.

Invest in Quality Software to Help Streamline Your Bookkeeping Process

When selecting accounting software for your bookkeeping business, it’s important to invest in quality software. Look for software with features such as real-time reporting, automated invoicing and bank reconciliation. This will help streamline your bookkeeping process, allowing you to quickly and accurately record financial transactions.

Learn How to Use the Software to Its Full Potential

Once you’ve invested in quality accounting software, it’s important to learn how to use it to its full potential. This could include taking advantage of features such as automated invoicing, bank reconciliation and real-time reporting. Take the time to familiarize yourself with the software and understand how it can benefit your business.

Conclusion

Starting a bookkeeping business can be a rewarding and profitable venture. To ensure success, it’s important to research the profession, develop a business plan, choose a business structure, obtain licenses and permits, purchase business insurance, secure financing and set up accounting software. With the right preparation and dedication, you can become a successful bookkeeper and enjoy the numerous benefits of joining the profession.