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Setting up a Bookkeeping Business

All you need to know about starting and running your business

Business guides » Setting up a Bookkeeping Business

What is a Bookkeeping business?

A bookkeeper is an individual who is responsible for preparing accounts, recording daily financial transactions and providing precise, up-to-date financial records and information about a business. Essentially, a bookkeeper helps a company or business keep its finances in order.

The records that a bookkeeper is responsible for are often used by businesses to make financial decisions and develop profit and business growth strategies. The information may also be used when the business is preparing its quarterly and annual reports.

Although many of their tasks are similar, a bookkeeper and an accountant have very distinct roles from one another. A bookkeeper is responsible for recording all daily transactions and allows the business to understand its finances right now, whereas an accountant will offer a future look at a business’s predicted finances. An accountant analyses the data provided by the bookkeeper to help the business make financial decisions. The accountant also uses the data to create financial reports. However, it could be that your bookkeeping business is asked to do some of an accountant’s duties.

Bookkeeping doesn’t require any specific training or qualifications, making this career an attractive one for many people.

As part of your bookkeeping business, you may choose to handle the finances of only one business or company, or you could bookkeep for multiple businesses. You could also hire additional bookkeepers in order to expand your business and offer your services to more clients.

A bookkeeping business will have many day-to-day responsibilities, including:

  • Recording financial transactions.
  • Balancing the books.
  • Checking and verifying payments against bank statements and other records.
  • Preparing income statements, showing a company’s revenue and expenses.
  • Preparing a cash flow statement (records of the cash coming in and going out).
  • Creating monthly reports.
  • Maintaining and monitoring financial records.
  • Creating and sending invoices.
  • Duties that are related to payroll.
  • Managing accounts.
  • Tracking all debits and credits.
  • Monitoring debt levels.
  • Generating financial statements and reports.
  • Tax preparation.
  • Maintaining the monthly and annual budgets.
  • Liaising with accountants, clients, banks and tax authorities.
  • Using spreadsheets, databases and bookkeeping software.
  • Reconciling or reporting any financial discrepancies.

 

Some bookkeeping businesses offer remote services, whereas others offer in-person bookkeeping. You could also choose to provide your clients with bookkeeping software that enables them to do some of the work themselves.

If you are thinking of starting up a bookkeeping business, there are certain skills and qualities you should possess. Excellent communication and organisational skills are key. You will also need to be detail orientated and client-centric, meaning your clients are the focal point of your service. Knowledge of the industry and previous bookkeeping experience may also be recommended.

Types of Customers

Determining your target market and the typical customers your business will likely attract is a key part of your business plan and should be considered before you set up your business.

Any business or company that has revenue and outgoings or expenses will have bookkeeping duties. However, some businesses, especially smaller businesses or those that are newly launched, may attempt to do their bookkeeping tasks themselves.

To increase your likelihood of gaining custom, you should target businesses that need to outsource their bookkeeping. This is likely to be larger, more established businesses.

However, because businesses can range hugely in size and revenue, you will still need to determine your target market.

You should consider:

  • The size of the business.
  • How established the business is (for example, has it been operating for one year or ten years?)
  • The business’s annual profits and expenses.
  • The type of business (for example, what industry the business is in).

 

Different businesses will require different skills and experience in their chosen bookkeeper and will pay different prices for bookkeeping services. For example, a business with 200 employees and an annual revenue of £3 million, will have different requirements compared to a smaller, family-run business with annual revenue of £100,000.

When deciding the types of clients you will target, you should consider:

  • Your bookkeeping skills and previous experience.
  • How established your business is.
  • The time you have available.
  • Whether you operate alone or have hired other bookkeepers.
  • Your pricing.
Bookkeeping Business Cartoon
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Bookkeeping Cartoon

Equipment You Will Need

When setting up your bookkeeping business, you will need to ensure you have all the necessary equipment to run your business and complete all of the required tasks.

Some of the equipment generally required for bookkeepers includes:

A laptop

You will need a high-specification, reliable laptop that can handle the amount of time you will be using it each day and all the software you will need to install. Alternatively, you could opt for a desktop computer, although they are less ideal if you need to attend in-person meetings. A high-spec laptop can cost between £1,000 and £3,000.

A secure password manager

You will have access to all your clients’ passwords and logins. For security reasons, you will need to ensure you protect all passwords and store them in a completely secure place. A password manager is a piece of software that acts as an encrypted vault for storing as many passwords as you need. Most password manager software requires you to pay a monthly or annual fee, with prices starting as low as £5 a month for a reputable company.

An e-sign tool

As a lot of your work will be conducted remotely, you will need an electronic signature (e-sign) tool. Having this tool will save you a significant amount of time compared to physically mailing each document when a signature is required. An e-sign tool allows you to email documents that need signing to your clients and receive an electronic signature immediately. Electronic signatures are legally recognised in the UK. You can expect to pay between £10 and £30 per month for this software.

A secure storage system

Many of the documents you work with will contain highly sensitive information that you will need to store securely at all times. The vast number of documents will likely require you to invest in secure cloud storage. You should ensure the storage you opt for is password protected and encrypted. You should also ensure everything is backed up externally to protect the information in the event of a technological issue. The cost of cloud storage can vary significantly, depending on the amount of storage you need.

A Microsoft Office subscription

Microsoft is a must-have for all bookkeepers. A subscription gives you access to Word, Excel, PowerPoint, Teams, OneDrive and more. Office Business subscriptions range in price from £4.50 to £16.60 per month, depending on your needs.

PDF to Excel converter

You will likely be dealing with PDF and Excel documents daily. Converting the documents to fit the clients’ needs or to enable the information to be processed by the bank may be required. Doing this manually can be extremely time-consuming, making a converter tool necessary. You can purchase a subscription allowing you to convert an unlimited number of documents for as little as £2 a month.

Scheduling tool or software

Scheduling tools allow you and your clients to make appointments and meetings without needing to waste time trying to find an available date and time. The software links to your calendar and recognises your availability. If a client books a meeting with you via the software, you will receive an automatic confirmation email and the meeting will appear in your calendar. Prices can start from as little as £2 per month.

Digital receipt software

This can help to make your life much easier. Rather than dealing with paper receipts or clients that can’t find physical copies, digital receipts allow you to keep electronic copies and store them safely. You can send clients their receipts via email and receive receipts from their outgoings and invoices. This can help to save you time when trying to calculate your clients’ expenses and balancing their books. The software can be purchased for £5 per month.

High-speed Wi-Fi

If you run your business remotely, you will need to ensure your Wi-Fi is reliable and high speed. You will likely be using the internet for much of the day and will need to ensure it doesn’t cut out in the middle of a meeting. Contact the available providers in your area and ask for an approximate speed per second for uploads and downloads. Wi-Fi prices usually start at £20 per month for a basic package, although this can rise to £50 depending on your provider and your required speeds.

Office furniture

Investing in high-quality, comfortable furniture can help to protect you from strain or injury. Ensure the furniture is an appropriate height and doesn’t require you to strain your neck or back. Your minimum furniture requirements will be a desk and ergonomic office chair, although you may also opt for additional furniture, such as secure filing cabinets and bookshelves.

Work from home equipment

Some of the other equipment you may require if you run your bookkeeping business remotely include:

  • A laptop stand.
  • A larger desktop monitor.
  • Noise-cancelling headphones.
  • A printer, scanner and fax machine.
  • A paper shredder.
  • Appropriate lighting.
  • Stationery, such as pens, pencils, notepads, diaries, highlighters and Post-it notes.
  • A transportable document holder.
Bookkeeping

Typical Pricing

Being aware of the typical costs associated with setting up and running your bookkeeping business is essential. It can help you to better plan your finances, calculate your initial investment requirements, determine your pricing and plan your profits.

Some of the costs associated with a bookkeeping business include:

Equipment

Your bookkeeping business will have few physical equipment requirements. Consult the list above to help you determine what equipment you will likely need. You can expect to pay between £2,000 and £15,000 for your equipment.

Monthly and annual equipment costs

Many of the programmes, software and other subscriptions your business will require will have a monthly or annual subscription fee you will be expected to pay. Depending on which subscriptions you require and the specifications of the ones you choose, expect to pay a minimum of £40 per month, although this could rise as high as £200 per month.

Branding

Branding is an essential expenditure for a bookkeeping business. It can help you to establish your business’s identity and set you apart from your competition. Branding could include creating your business’s visual identity, a logo, your business name, and creating your business website. You can hire a professional to help you with branding or do some of the work yourself. Branding can cost between £500 and £10,000, depending on the amount of branding you require.

Marketing and advertising

Marketing and advertising are essential ways to attract clients and grow your business, particularly in your business’s first year or when you are looking to grow your business. To ensure your bookkeeping business attracts clients and earns an income, it is recommended that you spend between 1% and 3% of your annual turnover on marketing. For example, if your annual turnover is £100,000, it is recommended you spend between £1,000 and £3,000 per year on marketing.

Insurance

Insurance is recommended to help protect your business, your equipment and your clients. Unfortunately, bookkeeping businesses can experience hacking, miscalculations or even equipment damage.

Some coverage options that can protect your business include:

  • Professional Indemnity Insurance.
  • Cyber and Data Insurance.
  • Office Insurance.
  • Employers’ Liability Insurance.
  • Public Liability Insurance.
  • Business Interruption Cover.
  • Commercial Legal Protection.

 

Insurance costs typically start at £10 per month but can rise, depending on the coverage you choose and your insurance provider.

Staff

You may initially operate your business independently and then hire more bookkeepers and other staff as your business grows. You could hire staff as permanent employees or as independent freelancers. If you hire staff permanently, you will need to pay them at least the national minimum wage of £9.50 per hour and account for other expenses such as holiday pay, sick pay and maternity/paternity pay.

Once you have calculated the typical costs associated with setting up and running your bookkeeping business, you can then begin to create your pricing strategy.

You will need to choose where to charge an hourly rate or a monthly fixed rate. In both cases, being aware of how much work the client requires and how long it is likely to take is key. It may also be recommended to request a retainer fee from your clients. This is money that is paid upfront in order to secure your services. Also, ensure you create a legally binding contract with each client before completing any work for them.

When determining your pricing strategy, there are several factors you should consider:

  • Your previous bookkeeping experience.
  • Your business’s reputation.
  • The types of services you offer.
  • Your competition.
  • The size of the business you are working with and their annual revenue.
  • The amount and type of work that is required.
  • Whether it is a one-time or ongoing contract.

 

On average, bookkeepers in the UK charge £20–£25 per hour, although this can rise to £50 for more experienced bookkeepers.

Safely Running a Bookkeeping Business

Safely running your bookkeeping business can help protect you, your business and your clients. The biggest safety risks you will face will be around technology and the internet. You will be responsible for the security of highly sensitive information, passwords and financial records. Protecting this information should be a top priority for your business.

Some of the safety protocols you should implement are:

Install anti-virus software

Anti-virus software can detect and delete malicious codes and intrusions on your computer or laptop. This can protect you and your business against viruses and malware. If your laptop becomes infected with a virus, this can cause irreparable damage to your equipment. The virus could even infect your clients’ computers, which could be detrimental to your business relationships. Anti-virus software should be installed on all of your devices and your home/office Wi-Fi.

Use a firewall

A firewall helps to protect the information stored on your devices. It prevents any unauthorised access to your device or accounts and sends you an automatic alert if someone attempts to access your information. Some computers and laptops come with a built-in firewall whereas others may need you to install or enable a firewall.

Install anti-spyware software

Spyware can monitor and collect your personal information and any information stored on your computer or electronic devices without you realising it. Some types of spyware can even detect your passwords and gain access to financial information. Ensure all your devices have anti-spyware software to protect your business and your clients.

Bookkeeping Business
Paperwork

Protect your passwords

As mentioned earlier, you will likely have access to many of your clients’ passwords and their account information. You must make sure these are protected and cannot be accessed by anyone but you. The most effective way to do this is by installing a secure password manager.

Always install updates on your browser, operating system and applications

One of the reasons why updates are released is to keep up to date with new security risks. Failure to install updates could make your computer vulnerable to hackers.

Secure your Wi-Fi network

Don’t simply set up your Wi-Fi and use the pre-given password. Choose your own secure password and ensure your Wi-Fi network is encrypted to prevent anyone from accessing or hacking it.

Use two-factor authentication

All your personal and business passwords should be set up with two-factor authentication. This means you will need to prove your identity in two ways, such as with your usual password and with a code that is sent to your registered mobile number. This adds an extra layer of security to your accounts.

Ensure the safety of equipment

Ensure all equipment is set up and used in accordance with the manufacturers’ instructions and that safety standards are being met. This includes your office furniture, which should be safe and supportive to prevent injuries and strain. You should also ensure electronic items, plugs and chargers comply with all electrical safety regulations.

Legal Requirements

There are certain regulations and legal guidelines you will need to be aware of.

Comply with the Money Laundering Regulations (MLR)

Any person who provides bookkeeping services must ensure their complicity with these regulations. You will need to be monitored by an HM Treasury appointed supervisory authority, such as the Institute of Certified Bookkeepers (ICB). Your business must also put controls into place to help you identify and prevent money laundering.

Apply for an Anti-Money Laundering Licence

You must apply for an Anti-Money Laundering Licence at least 45 days before your business begins operating. Most licences need to be renewed annually. One of the most popular licences is the Practice Licence with the ICB. This licence also provides your business with supervision under the Money Laundering Regulations and tools and guidance to help you ensure you are complying.

Comply with the Companies Act 2006

Complying with the Companies Act is a legal requirement for all bookkeepers and accountants in the UK. You must ensure that the businesses you work with keep adequate accounting and financial records, including money received, money spent and any assets. The company must keep records for three years if they are a private company and six years if they are a public company.

Comply with the Financial Reporting Standards

Any person or business who is involved in the preparation of financial reports must comply with the regulations regarding how reporting is done. The Financial Reporting Standards ensure that companies maintain their credibility and report their finances in an honest and transparent manner.

Comply with the Professional Conduct Regulations

These regulations state that you must maintain good ethical and professional conduct at all times.

Register with the Information Commissioner’s Office (ICO)

The ICO enforces the General Data Protection Regulations (GDPR) as set out by the government. If you process any of your clients’ personal data, you must register with the ICO. The cost of your registration will be determined by the ICO, and your registration will need to be reviewed every year.

Retain your records

It is a legal requirement that you maintain all your bookkeeping records and proofs of transactions for six years. Your records may be inspected, and you could face legal measures if they are not correct.

Carry out risk assessments

If your business has five or more employees, risk assessments are legally required. Your risk assessments should identify any potential hazards and risks and how these can be reduced or eliminated.

Risk assessment should:

  • Identify hazards.
  • Determine who could be at risk.
  • Evaluate any potential risks.
  • Implement relevant safety measures.
  • Record the results of the risk assessment.
  • Review the risk assessment regularly.

 

Have the correct insurance

Although some types of insurance are only recommended for your business, other types are legally required. All bookkeeping businesses in the UK must have Professional Indemnity Insurance.

Register your business

You must register your business with HMRC before you begin operating. You can register as a sole trader or as a limited company. You will need to register your business name and any other relevant information.

Register for self-assessment tax

This allows you to calculate and pay your own taxes each year. You will need to track your finances every month and submit any expenses as part of your tax assessment.

Bookkeeping Business Job

Positives of Owning a Bookkeeping Business

A bookkeeping business can be an extremely rewarding career in many ways.

Some of the main pros associated with a bookkeeping business are:

It’s a growing industry

With more and more businesses in the UK requiring financial services, bookkeeping and accounting is a growing industry. You shouldn’t have to worry about your business not succeeding or your services no longer being required, as you are more likely to see your business grow.

High earning potential

Bookkeepers have the potential to earn high profits. As you gain experience and your business grows, you can begin to charge premium prices. The larger the revenue of the businesses you work with, the higher your price points will be. Businesses are willing to pay top prices for the best bookkeepers who can help improve their finances and this is something you can take advantage of.

Low start-up costs

A bookkeeping business is a relatively low-cost enterprise. You will have few equipment requirements and your start-up costs and running costs will be fairly low, making it easier for you to maximise your profits.

Great opportunities for growth

As your business becomes more successful, you can hire additional bookkeepers, allowing you to expand your business. The more businesses you bookkeep for, the higher your profits will be. If you operate remotely, you can also work with businesses all over the country, which expands your potential reach.

Opportunities to run your business in other places

Bookkeepers are needed all over the world and many other countries place value on bookkeepers who have knowledge of the UK and US financial markets. You could move abroad and run your business from another country or even move your business to another part of the UK. This is a great advantage for people who may want to travel or don’t yet know where they want to base themselves.

Pick and choose your clients

Being aware of your target market and the types of clients that are going to be most beneficial to your business will enable you to maximise your opportunity. As the business owner, you can pick and choose the clients you work with and decline any clients that you don’t think will be beneficial to your business’s growth and profits.

Option to run a remote business

You can choose to run a remote bookkeeping business, meaning you will be able to work from home (or even a tropical beach if you choose). Many businesses prefer to hire a remote bookkeeper and may only request video calls to discuss their expectations and your findings. Being able to run a remote business gives you much more freedom with your time and lifestyle and you can save money on your daily commute.

Control your own workload

You can choose how many clients you take on and your working hours. As your business grows, you could even choose to take a hands-off approach and allow your employees to handle the clients.

Be your own boss

Being your own boss gives you the opportunity to control the growth of your business, manage your own time, and gain more self-confidence and job satisfaction. Owning your own bookkeeping business also means that all your profits will belong to you, and you will be in control of creating your ideal business.

Gain exposure and experience

Bookkeeping for high-profile clients or receiving great reviews from previous clients is a great way to gain exposure and gain more clients. Businesses are likely to use a bookkeeper who has established success or who is recommended to them making it possible to gain business through other clients. Helping to turn around the finances of a business can also make you well-known within your industry.

Rewarding work

Not only can bookkeeping be financially rewarding, but it can also be personally rewarding. Seeing how your skills and work can help other businesses and help them to grow in the future can be very rewarding.

Sorting Out Accounts

Negatives of Owning a Bookkeeping Business

However, there are some negative aspects of owning a bookkeeping business that you should be aware of. This includes:

It can be boring

Even if you enjoy organisational work and mathematics, bookkeeping can be boring, especially if your work seems repetitive and you are doing the same tasks every day. You will also likely be working on a business’s finances alone, or only occasionally partnering with others, making it a potentially lonely profession.

You constantly need to educate yourself

You need to always stay up to date on laws and regulations regarding business finances, changes in payroll and taxes, and even the different software and programmes that are released. If you don’t do this, it could create financial issues for the company, or even result in legal implications.

Busier times of year

There are certain times of the year when you are likely to be significantly busier. This could be March–April when the tax year is coming to an end, and November–December when the calendar year is coming to an end. You may find yourself inundated with work at these times and working overtime, which can be stressful. You may also find other times of the year are quieter and you have less work, negatively impacting your profits.

It can be stressful

Having the main responsibility for a business’s finances can be stressful, especially if there is a lot of work to do, the finances were previously done incorrectly, or the business owner puts a lot of pressure on you. You will likely have a lot of responsibilities and all of your work needs to be done perfectly.

Longer sales process

Each client you take on will be long term and even clients who hire you for a one-time bookkeeping job will likely require your services for weeks or months. The longer sales process involved in bookkeeping will mean you won’t have the capacity to take on more clients and it will take longer for you to earn each commission.

High time commitment

You may think of bookkeeping as a 9–5 profession, but this isn’t always true. You may have to work a lot of overtime, particularly nearing the end of the calendar year and the tax year. Once you incorporate the time you will need to spend familiarising yourself with changes and new software, bookkeeping can quickly become a time-consuming profession. You should also consider the additional time you will need to spend running the business, such as advertising and marketing, accounts and handling any staff.

High liability

If something goes wrong, a business’s finances are not correct or the business doesn’t make its expected profit growth, the business owner may blame you. This can be detrimental to your reputation and can have a negative impact on your business.

Some clients may be difficult

Some clients may have a lot of demands and expect too much from you. They may be demanding and difficult to deal with and expect you to complete a lot of tasks, deal with many issues or perform financial miracles. This can be stressful for you and have a negative impact on your time availability for other clients.

Experience is usually required

Starting up a bookkeeping business from scratch can be very difficult, especially if you have no previous experience. In order for your business to succeed, you may need to first work within the industry, complete training and make industry connections.

Planning Your Bookkeeping Business

Creating a detailed and effective business plan is an important step in ensuring the success of your bookkeeping business.

Your business plan should look at every aspect of your business and all the possible ways you can maximise your profits and encourage growth. It should also consider any possible issues or difficulties you could face.

Your business plan should include information such as:

  • Your company information.
  • Your company description.
  • The types of bookkeeping services you will provide.
  • Your branding, marketing and advertising plan.
  • The structure of your business.
  • The operational plan for your business.
  • The financial plan for your business.

 

When creating your business plan, there are some important considerations you should make:

What types of services will you offer?

Consider your own skills and your previous experience and training when considering the services you will offer. You will need to offer all the typical services your clients will expect as standard, but may also offer additional services that will help your business stand out and make you more attractive to potential clients.

What will your typical client base be?

Determining your typical customer base can help you to plan your advertising and marketing strategies and help you to make your business most attractive to prospective customers. The types and sizes of the businesses you target will also help you to calculate your pricing.

What are your staffing requirements?

You can choose to operate as a sole bookkeeper or hire additional staff. Consider the additional profits you could make by hiring more bookkeepers and compare this with the additional outgoings you will have, such as their wages and the cost of additional equipment. If you think there is a market for more bookkeepers, hiring staff can help you to grow your business and maximise your profits.

What are your equipment requirements?

Consult the list above to help you determine your equipment requirements. You will need to decide what equipment you require and research what equipment will be provided by the clients themselves. Consider the services you will provide, your budget, and your clients’ needs when determining your equipment requirements.

What competition do you have?

As well as considering your local competition, you will also need to consider bookkeeping businesses that operate remotely. You will first need to check whether there is enough demand for your services. You should also consider ways you can stand out from your local competition, for example with your branding or the services you offer. Researching other bookkeeping businesses in detail to determine ways their business succeeds and what they could do to improve their business is another way to encourage your own business’s success.

What are your start-up costs and running costs?

Consult the list above to help you calculate your start-up costs and running costs. Being aware of your approximate costs allows you to determine how you will finance your business and when you are likely to start making a profit. It can also help you to determine your pricing strategy.

What will you charge for your services?

Once you have calculated your start-up costs and running costs, you can determine your pricing. Consider whether you are going to charge your clients hourly, weekly or monthly. Consider your experience, the type of businesses you are working for, the services you will offer and the expected time it will take when determining your pricing.

What will your advertising and marketing strategies be?

Advertising is key to your business’s success, especially in your first year of operation. Consider how you can appeal to your target customers and how you will ensure they encounter your adverts and come across your business.

What are your business objectives?

Planning your bookkeeping business and creating a one-year, three-year and five-year plan can be pivotal to the success and growth of your business. Having clear business objectives and a business plan can make your business more likely to succeed.

Your business objectives should be SMART:

  • S = Specific
  • M = Measurable
  • A = Achievable
  • R = Realistic
  • T = Time-bound

Have you complied with all legal requirements?

Consult the list of legal requirements above to check you have complied with all requirements and regulations and that all your paperwork is accurate. Failure to comply with legal requirements could have a detrimental effect on your business or could result in a fine, the forced closure of your business or, in serious cases, prosecution.

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