How to Start a Bookkeeping Business

Last Updated on

Quick Reference

If you have excellent attention to detail, enjoy the challenge of balancing multiple projects, and have strong math skills, a career as a bookkeeper may be a natural fit for your skills. While you can certainly work as a bookkeeper employed by a single company, if you want more control of your schedule, workload, and income, then it may be time to consider starting a bookkeeping business of your own. As a business owner, you’ll be in charge of everything from your marketing to closing deals with new clients. But, you’ll also enjoy plenty of perks, too, including a potentially higher income than you’d have when working as a business’ employee. Read on to understand all of the benefits and challenges that come with this exciting business opportunity to decide if it’s the right career move for you. 

Business Overview

Bookkeeping businesses help other business owners to maintain their business’ financial records. Bookkeepers often perform many different tasks, including recording account debits and credits, checking financial statements for accuracy, verifying receipts, creating invoices, and reconciling financial records. Some bookkeepers may also handle a business’ payroll, and they may follow up on outstanding invoices.

While some businesses hire their own internal bookkeepers, it’s becoming increasingly popular to hire independent bookkeepers to help. This is particularly true when a business is smaller and doesn’t have the demand or budget to justify hiring a full-time bookkeeper. As a result, independent bookkeeping services may balance multiple accounts at any one time.  

These independent businesses are sometimes staffed by a single person – the business owner – though successful businesses can expand and hire a roster of bookkeepers. Thanks to the internet, some businesses even operate entirely remotely, never meeting with clients in person. In these instances, the bookkeepers on staff can also be located remotely. This remote situation increases a business’ access to potential clients, making for a larger client base. 

Industry Summary

According to IBIS World, the bookkeeping and payroll industries have undergone recent substantial growth. From 2014 to 2019, the industries experienced a 4.9 percent growth, and they were projected to bring in $81 billion in revenue in 2019, alone. During that five-year period, the number of businesses grew to 305,060, and industry employment also increased to 939,837.

That growth is closely related to the state of the labor market. As the number of jobs and businesses in existence increases, the demand for bookkeeping services also grows. With the economy improving from 2014 to 2019, and continuing to improve today, it suggests a promising future for the bookkeeping industry. 

Industry Trends

The accounting industry is evolving and changing, and MYOB identifies multiple trends that are currently shaping the industry. Bookkeepers are increasingly becoming more of a voice in business strategy, rather than being called on strictly for number crunching services. Bookkeepers who don’t only monitor and create reports, but who then analyze those reports and make recommendations on strategic decisions, are more valuable to businesses today and can make a big difference in a business’ performance. 

There’s also been a shift to an increased use of technology and automated processes in the bookkeeping industry. As bookkeepers integrate technology that can save them time and take care of some of the more basic, repetitive processes, they’ll have more time to focus on client services like analyzing data and making those valuable recommendations referenced above. 

The employment industry is changing, and with a near-constant focus on productivity, it’s important for bookkeepers to prioritize a work-life balance. Bookkeepers are becoming more selective about the clients they take on, realizing how important it is for a client to be a good fit for their business, and vice-versa. 

Who is the target market for a bookkeeping business?

At the basic level, bookkeeping businesses market to business owners who need professional help in maintaining and preparing their financial statements and records. Some bookkeeping businesses specialize in working with certain types of businesses, like businesses in the financial industry, small businesses, or large corporations. 

Skills, experience, and education useful in running a bookkeeping business

While a bookkeeper won’t need a business degree to start a bookkeeping business, certain skills and experiences can increase the business’ chance of being a success. 

Bookkeeping experience. Before starting a bookkeeping business, a business owner should have completed an internship or worked as a bookkeeper to get a sense of what’s involved in the industry and to be certain that this career is right for them. 

Strong math skills. Bookkeepers use math daily, so strong math skills and comfort working with numbers is essential. 

Attention to detail. Attention to detail is incredibly important, since even small mistakes can have big implications in bookkeeping. 

Strong communication skills. Bookkeepers often need to explain detailed topics to clients. Strong communication skills and creativity can help with this.

Education, certification, and licensure. While it’s possible to work as a bookkeeper with only a high school diploma, additional education can prepare a bookkeeper for the challenges they’ll face when owning their own business. According to USA Today, once a bookkeeper has worked in the industry for two years, they can become certified through the American Institute of Professional Bookkeepers. Certified bookkeepers can later go on to earn a license through the National Association of Certified Public Bookkeepers. This licensure requires that bookkeepers complete 24 hours of professional continuing education classes. While certification and licensure aren’t required, they can build a client’s trust in a bookkeeper. 

Costs to Start a Bookkeeping Business

Bookkeeping businesses have relatively low startup costs, especially if they’re initially run out of a home office, rather than renting office space. Expect to pay about $10,000 to start up a business out of a home office. Larger businesses that are started out of rented offices will carry higher startup costs, starting closer to $20,000. 

Common startup costs for a bookkeeping business include: 

  • Office furniture and filing cabinets
  • Equipment like computers and printers
  • Bookkeeping software
  • Office supplies
  • Office phone and internet service
  • Signage

Steps to Starting a Bookkeeping business

 Step 1. Write your Business Plan

After coming up with the idea, the next step in starting your business should be to write a business plan.  Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.

Related:
How to write a business plan
Free sample business plans

Step 2. Form a Business Entity

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from which include the sole proprietorship, partnership, corporation and LLC.  Each type of entity has its own pros and cons such as liability exposure, costs and administrative requirements. 

Related: Comparison of Business Entities

Step 3. Select your Location

Small bookkeeping businesses can avoid rental costs by operating out of a home office, but if a home office isn’t available or is impractical due to the need to meet with clients, the business will need to rent office space. Rental costs will vary depending on the size of the office and its location. Some bookkeepers even operate virtually, requiring no physical office space for clients to visit. 

Related: Choosing a business location

Step 4. Apply for Business Licenses and Permits

Unlike Certified Public Accountants (CPA), there is no licensing specifically for bookkeeping businesses.  There is however a national certification from the National Association of Certified Public Bookkeepers called the Certified Public Bookkeeper (CPB) that may provide credibility in your skills to potential customers. 

Additionally, depending on where the business is located, some general local, state and federal registrations a bookkeeping business may include a home-based business license, Employer Identification Number among others. 

Related: Common business licenses, permits and registrations by state

Step 5. Find Financing 

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a bookkeeping business is another.  In order to get a loan, the borrower(s) will need to have good credit and be able invest 15-25% of their money towards the total start-up costs. 

Related: Finding the money to start a business  

Step 6. Get your Marketing Plan in Place

Ongoing marketing can ensure that bookkeeping businesses are able to expand their client base. Common marketing activities include social media marketing, print advertising, online advertising, and networking at local business events. Bookkeeping businesses may also implement customer referral programs. Marketing costs will depend on the type of activity being performed. 

Related: Low-cost ideas to market a new business

Step 7. Get Insurance

Any bookkeeping business needs several types of insurance: 

  • General liability insurance protects the business if a client is ever injured while on the property, but it can also protect the business in case an error the bookkeeper makes causes financial issues for a client. 
  • Commercial property insurance protects the business against the financial loss it would face if its office and equipment were ever lost in an event like a fire.
  • Worker’s compensation insurance helps to cover expenses like medical bills or lost wages that can occur if an employee is hurt while working, like if they tripped and fell while in the office. 

The costs of these insurance policies can vary depending on variables like where the business is located and the number of employees on staff. To get the most accurate idea of what insurance will cost, request quotes from multiple providers and compare those quotes while looking at factors like coverage limits and exclusions, premiums, and deductibles. 

Step 8. Hiring Employees

A bookkeeper can open their own business and operate as the sole bookkeeper, but as the business grows, it may become time to bring in additional employees. PayScale reports that bookkeepers earn an average salary of $42,806 per year, though highly experienced bookkeepers may earn closer to $60,000 per year. According to Salary.com, receptionists earn an average of $36,531 per year. 

These salary costs are just one expense that come with hiring staff. A business also needs to budget for expenses like workman’s comp insurance, paid time off, and health insurance contributions. 

Related: Hiring your first employee

 


Amazon has several books that go into detail on starting and running a bookkeeping business:


How much can you potentially make owning a bookkeeping business? 

While bookkeepers earn an average of $42,806 per year, many factors will affect what you can expect to earn from your business. Your location, the types of clients that you work with, the volume of work that you take on, and your rates will all affect your income. Freelance bookkeepers often earn more than bookkeepers employed by a company do, since they can determine their rates and take on as much work as they like. If you’re driven to succeed, you could build your business into a highly profitable venture. 

Things to consider before starting a bookkeeping business

When you run a bookkeeping business, it’s important to implement systems and processes. These systems create consistency and they can help to prevent you from overlooking important details or steps. They can also make you more efficient, and if you have multiple people working in your business, they can help everyone to work together smoothly and accurately. 

Bookkeepers often offer additional services to small businesses over their core bookkeeping services such as payroll, billing services, tax preparation and more. 

If you haven’t previously worked as a bookkeeper before, consider working for a bookkeeping business for a few years before starting a business of your own. This can be an excellent introduction to the challenges of the industry and will give you an understanding of how a well-run operation functions. You’ll be able to build your knowledge and skills while on the job, then can apply that experience to your own business. 

Resources:
American Institute of Professional Bookkeepers
National Association of Certified Public Bookkeepers
National Bookkeepers Association