Starting a bookkeeping business is something you might be interested in if you naturally love numbers and want to break free of the traditional nine-to-five. It’s possible to offer bookkeeping services to clients in person or remotely, which may be ideal if you would prefer a work-at-home job.
Before starting a bookkeeping business, you’ll first need to know the basics of operating legally. It’s also helpful to understand how to market your services and manage the financial side of running a business.
Key Takeaways
- A degree in accounting is not required to start a bookkeeping business, though a certification in bookkeeping can be helpful to have.
- You’ll need to choose a business structure, and register your business with the proper state authorities if required by law where you live.
- If you plan to hire employees, you may need to obtain workers’ compensation insurance in compliance with state law.
- Developing a solid marketing plan can help you build your brand and attract clients to your business.
Understanding the Legal Requirements
The legal requirements for starting a bookkeeping business are similar to any other type of business. Some of the most important things you’ll need include:
- Selecting a business structure (i.e., sole proprietorship, limited liability company, etc.)
- Choosing a name for the business
- Registering your business with the proper state agencies
- Obtaining a federal Employer Identification Number (EIN) and state identification numbers, if necessary
- Applying for any necessary licenses or permits
- Opening a business bank account
- Getting business insurance, including liability coverage and/or home-based business insurance
The exact requirements for starting a small business will depend on the state in which you live. You may need to contact your secretary of state or department of revenue for more information on what paperwork you may need to complete to legally establish your bookkeeping business.
There may be additional steps required if you plan to hire employees for your business. For instance, you may need to obtain workers’ compensation insurance. The requirements for workers’ compensation vary by state.For instance, California requires workers’ compensation for all employers, regardless of the number of employees. In Alabama, on the other hand, businesses are not required to purchase workers’ compensation insurance if they have fewer than five employees.
Important
Some states may impose steep penalties against businesses that fail to obtain workers’ compensation insurance.
Acquiring Bookkeeping Skills
Starting a bookkeeping business requires an understanding of accounting and bookkeeping practices. You may need to first complete a training program before you can launch.
For example, you might pursue any of the following:
- Bookkeeping certification
- Tax certification
- Accounting software certification
Unlike the requirements to become an accountant, the training required to become a bookkeeper is less strenuous. It’s possible to find and complete an online training program from home.
As you compare online bookkeeping courses, consider the range of topics covered, the course format, and the cost. Whether it makes sense to obtain just one bookkeeping certification or additional tax and accounting software certificates can depend on your niche and the types of services you plan to offer.
Note
While a degree in accounting may be helpful for starting a bookkeeping business, it’s not an absolute requirement.
Creating a Business Plan for Your Bookkeeping Business
A business plan is a detailed overview of how you plan to launch and grow your business. There are several key elements that are typically included in a comprehensive business plan. Here’s what yours might look like as you draft a plan for your bookkeeping business.
- Executive summary: The executive summary should offer a brief overview of what your business is about, your mission, and how you’ll be successful. Your mission statement can also include information about your employees (if you plan to hire any) and your plans for growth.
- Company description: Your company description is an opportunity to provide additional details about your business, including who you plan to serve and what problems you’ll solve for your clients.
- Market analysis: Market analysis allows you to look at your competitors and identify their strengths and weaknesses. Completing this section can help you better understand what makes your bookkeeping business unique.
- Organization and management: This section should describe how your business is legally structured and who’s responsible for running it. If you’re operating as a one-person business, this part of your plan will likely be brief.
- Services: In the services section, you can expand on what types of services you plan to offer as a bookkeeper and who you expect your customers to be.
- Marketing: How you market your bookkeeping business can depend on your niche or target audience and what resources you have to invest in advertising. You’ll use this section to sketch out your marketing plans for attracting clients to your business.
- Financial projections: This section is where you’ll outline how much revenue and profit you expect to make from the business.
Having a business plan to start a bookkeeping business isn’t a requirement, but creating one can help you get some clarity on what your goals are and how you plan to proceed with growing the business. Even if you’re just planning to offer bookkeeping services remotely as a sole proprietor, it can still be helpful to flesh out the exact steps you’ll need to take to succeed.
Tip
A business plan may be required if you plan to apply for business financing from banks or investors.
Marketing Strategies for Your Bookkeeping Business
When you start any new business, you can’t expect customers or clients to magically find you. Instead, you’ll have to invest some time (and perhaps, money) in marketing your business.
If you’re specifically interested in working as a bookkeeper remotely, establishing a website and social media profiles may be a starting point for your marketing plan. Both can make it easier for potential clients to find you in online searches. You can also leverage social media to build your brand and increase your visibility.
Aside from a website and social media, there are some other options you might consider for marketing your services. They can include:
- Using LinkedIn to build out your professional network and establish credibility
- Joining a local meetup group of bookkeepers in your area
- Joining a professional business association in your area
- Participating in local small business events
- Seeking out opportunities to be a guest on podcasts in the finance niche
- Offering a seminar or workshop, either online or in person
When planning your marketing strategy, it’s important to think about the message you want to send to prospective clients. That message should be consistent across all of the channels you use to market your business, whether that includes YouTube, Facebook, TikTok, or another platform.
It’s also important to consider who your message is targeting. Your marketing content should speak to the needs and pain points of the types of customers you’re most interested in attracting to your business.
Managing Finances in Your Bookkeeping Business
Keeping track of cash flow is essential for running any business. As you prepare to start your bookkeeping business, it’s important to keep track of your expenses, which may include:
- Website hosting
- Accounting software
- Customer relationship management (CRM) software
- Cloud storage fees
- Home office supplies (if you’ll be working remotely)
- Registration fees
- Fees for certification or training
- Marketing costs
Once your business gets under way, you can make a monthly budget to track your cash inflows and outflows. You’ll also need to give some thought to how you plan to invoice your clients for your services. That includes choosing when to send invoices, how quickly you expect them to be paid, and which payment methods you'll accept.
Running a business also means paying taxes on your earnings. That includes income tax and estimated quarterly taxes. Generally, you’re required to make estimated quarterly tax payments to the Internal Revenue Service (IRS) if:
- You expect to owe at least $1,000 in tax for the year, after subtracting withholding and refundable credits.
- You expect your withholding and refundable credits to be the smaller of 90% of the tax shown on your current year’s return or 100% of the tax shown on your prior year’s return.
Note
If your state imposes an income tax, you’ll also be responsible for making estimated tax payments to your state agency.
Opening a business bank account can make it easier to keep track of what funds go in and out. You can open a business bank account at a traditional bank, credit union, or online bank. You’ll need to provide your personal information, along with your business details, in order to open an account. Comparing fees, features, and accessibility can help you choose the best business bank account for your needs.
You might also consider applying for a business credit card to help cover expenses until you start making money. You can apply for a business credit card using your personal credit score and income; business credit is not a requirement. If you’re considering a business credit card, you might want to look for one that offers a generous rewards program and/or charges no annual fee.
Acquiring Clients for Your Bookkeeping Business
Once you’ve covered all the legal aspects of starting your business, it’s time to start finding your first clients. There are a few ways you can go about doing this. These include:
- Looking for remote bookkeeping opportunities on freelance job boards
- Establishing profiles on sites like Fiverr or Upwork, which connect companies with freelance workers
- Reaching out to local businesses to ask if they need bookkeeping services
- Running ads on social media
- Joining local small business directories
- Offering a free consultation to local businesses
- Asking friends, family, or other business owners for referrals
Once you start getting your first clients, it’s important to focus on customer satisfaction. Clients who are happy with your services are more likely to stay loyal and continue to hire you. They also may be willing to refer you to people they know who might need a good bookkeeper.
Is Bookkeeping a Profitable Business?
Bookkeeping has the potential to be a profitable business if you’re able to maintain a solid roster of clients who are willing to pay competitive rates for your services. A typically remote bookkeeper’s salary is just over $63,600 a year, but it’s possible to make much more than that, depending on your clientele and the rates you charge.
Can You Start Your Own Bookkeeping Business?
It’s possible to start a bookkeeping business from scratch, even if you don’t have a professional or educational background in accounting or bookkeeping. Having a degree or certification in either area could be an advantage, but it’s possible to acquire the skills you need to become a bookkeeper online. Likewise, you don’t need to have experience running a business, but that could also prove helpful.
How Much Should I Charge My Bookkeeping Clients?
The amount you should charge your bookkeeping clients can depend on a number of factors, including how much experience you have, which certifications you hold, the types of services you offer, and the types of individuals or businesses you work with. Someone who’s new to the profession, for example, may start their rates at $20 an hour, while someone with several years of experience may charge $35 an hour or more. Researching average bookkeeper salaries for your area can give you an idea of what your competitors may charge.
The Bottom Line
Starting a bookkeeping business can be a great opportunity to take control of your career. Before diving in, however, it’s important to understand what’s involved to get your new business up and running. The more prepared you are before launching, the greater your chances of succeeding as an expert bookkeeper.
