Starting your own bookkeeping business can be pretty profitable. There aren’t significant barriers to entry if you already have experience. Aside from technical skills, you just need a computer, internet connection, and place to work.
How much you can earn from a bookkeeping business varies between experience, niches, and how you present yourself. While a full-time employed bookkeeper might make $22 per hour, a freelancer can look towards $60 per hour.
By starting your bookkeeping practice, you can ultimately make more money while working less.
This article discusses six steps to kickstart your freelance bookkeeping venture. It includes:
- Investigating the need for a bookkeeping certification;
- Creating a business plan;
- Choosing a business name and structure;
- Setting up your operations;
- Managing your tech stack; and,
- Marketing your business
1. Look at bookkeeping certifications
Bookkeepers don’t have the same rigid standards as Chartered Professional Accountants (CPAs). There’s no standardized exam or post-secondary school requirements. Employers hiring a bookkeeper may only look for a high school diploma.
However, bookkeeping training courses and certifications can better your skills and make your bookkeeping practice look more legitimate.
Taking specific courses can let you become a certified bookkeeper or certified public bookkeeper. Many community colleges also offer bookkeeping diplomas. But these certifications are not mandatory to starting a bookkeeping business or working as a bookkeeper.
A certification is a great way to hit the ground running for those who know little about bookkeeping. But if you’ve been managing small business cash flows for years, your experience may better speak for itself.
2. Create a business plan
The foundation to starting any business is a business plan. There are numerous components to a business plan, including:
- Overall strategy and business description
- Market and competitive analysis
- Organization and structure
- Operating plan
- Sales and marketing strategy
- Financial plan
- Technology stack
But the most essential part of the plan is forcing yourself to consider every aspect of your venture before you pursue it. This ensures everything is thought through and leaves you prepared to take on unexpected challenges.
Consider, as you develop your business plan, you’ll think through what services to provide.
Suppose, during the planning process, you contemplate whether also to offer tax return services. Your business plan could make you thoroughly consider this route and its benefits and drawbacks. Tax services would require additional training, but it could diversify your revenue and increase profits.
You’d further project your financial statements and predict the profits you’d see in the first twelve months. This way, you won’t scramble to put a projected financial statement together only when you really need it.
Without this plan, you head into your business blindly — unaware of the issues you’re about to face. You might further realize that through this process, a practice is too much to handle and continue the employee route instead.
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3. Decide on your business name and business structure
Bookkeepers run their business as a sole proprietorship or partnership. Some may even run as a corporation.
Sole proprietorships operate with one person at the helm. In contrast, partnerships accommodate two or more people. So, choosing between these two isn’t difficult. If you’re running solo, go with a sole proprietorship. If you’re rolling with a partner or partners, select a partnership.
In both situations, you and your business function as one person. This generally means that:
- You report the income you earn on your personal tax return
- Any lawsuits against your business can claim damages against your personal assets
- Creditors have a claim against your personal assets
A corporation can provide benefits in that it creates a separate entity. A corporation has its own tax return, and anyone claiming damages against the corporation or chasing it for money can’t come after you personally unless a contract says otherwise.
A corporation, lastly, continues to exist after your death. In contrast, your sole proprietorship or partnership dissolves if you’re no longer here.
However, corporations are complex. They require significant paperwork, annual filings, minute books, and more. Maintenance is often expensive and time-consuming, without many benefits to a bookkeeping business. That’s why many choose to pursue a sole proprietorship instead.
Related: How to register a business in Canada
It’s best to speak with an accountant or lawyer to learn what structure is best for your situation.
4. Set up your operations
Setting up a business requires a lot of chores to ensure smooth operations. You’ll likely continue working out the kinks as you go. But the following are the basics to set up your business operations.
Business bank account
As a bookkeeper, you should understand the importance of having a separate bank account for your business and personal life. This separation prevents confusion of what expense belongs where.
You also need the proper debit and credit cards for your business. Other banking products like a line of credit may also be helpful for your company.
Find office space
Traditionally, any bookkeeping business needed its own office, which was a significant expense. But remote work and hot desks now provide more options for workspaces.
An office back in the day might have cost hundreds or thousands in rent per month. You needed this space to meet clients and collaborate with employees. But not anymore. You can easily replicate the whole experience with video conferencing software and a home office.
Alternatively, hot desks are a popular option. There are many co-working places for small businesses like yours that are much more affordable than a whole office. They provide a place to meet clients and get work done without the distractions of being at home.
Purchase insurance
Bookkeepers need to have the right insurance. Professional liability coverage reduces your financial burdens if you’re sued for negligence, malpractice, or unmet expectations.
Suppose you make an error while bookkeeping. These errors might result in a tax reassessment, which requires your client to hire a tax lawyer to object to the Canada Revenue Agency’s claim. In this situation, your client might sue you for damages, and you could be liable to tens of thousands of dollars in legal fees and damage awards.
However, professional liability insurance pays for these legal costs, so you’re not worrying about such a financial fallout.
Other important policies include general liability insurance, which cover lawsuits arising from day-to-day risks related to bodily injury and property damage — say, for example, someone slips in your office and hurts their back.
Further, contents insurance provides the replacement or repair value for your business equipment if it’s ever lost, stolen, destroyed, or damaged.
5. Become technology first
Businesses now all require the proper technologies. We’re no longer doing bookkeeping on a paper ledger. Even spreadsheets are becoming outdated as bookkeeping software provides a more bespoke experience that fits a bookkeeper’s needs.
Consider some of the following tools for your business:
- Accounting and bookkeeping software: This includes tools like QuickBooks, Xero, and FreshBooks. These programs help you track your expenses and incomes and your client’s finances. You can use them to stay organized and better serve the companies you work with.
- Customer relationship management system: Tools such as Monday.com or Salesforce let you keep track of your clients. You can note when their invoices are due, their needs, and much more. However, if you’re just starting, a spreadsheet might be just as good as you won’t have many clients.
- Video conferencing: Programs like ZOOM or Microsoft Teams are a no-brainer nowadays. These tools let you meet with clients or employees from the comfort of your own home.
- LinkedIn: Although LinkedIn might not seem like “software,” it’s commonly a powerful tool to build a business. It lets you scope out potential clients, network, and advertise your practice.
6. Market your business
Ensuring that other companies know that your bookkeeping services exist is vital. A website, social media, and networking are three ways to get your name out there.
Website
Your website is the online headquarters of your business. It ensures leads understand your services, credentials, and more. Some bookkeepers even use their website as a client portal. This allows clients to check the status of their books and receive any finished deliverables.
Social media
Now, we’re not saying to make TikTok dance videos to promote your bookkeeping business. (But by all means!) We mentioned LinkedIn prior, and it’s crucial to create your business presence on LinkedIn through a company profile.
If you’re a sole proprietor, you are the business. That’s why leveraging your LinkedIn personal profile is a great way to attract leads to your company.
Posting relevant and thoughtful content and engaging with others is also a fantastic way to promote your personal brand and have others notice you and your services.
Networking
Networking is a crucial way to get your name out there as a bookkeeper. This could be attending local business or community events. Networking is also just meeting new people and understanding their pain points while advertising your solution.
Networking can happen anywhere. It might be at your child’s swimming classes or during your morning workout. Make sure to keep some business cards on you just in case!
A bookkeeping business can be a fun and rewarding venture. It can pay significantly more than bookkeeping as an employee. However, there are several steps you must first take before you can start bookkeeping on your own rules.
Ensuring you have the right insurance to protect your business is one of these crucial steps. Contact us to learn more about what insurance policies a bookkeeper needs here.
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