Starting a bookkeeping business can be a fun and rewarding experience. However, there are a few things you need to know on how to start it. But with proper planning and preparation, it’s easy to get started and grow your business. This article will teach you everything you need to know on how to start a bookkeeping business by following some steps.
What Is A Bookkeeping Business?
The process of keeping track of financial information relating to an organization or business is known as bookkeeping. It can be a lucrative way to supplement your income and provide for your family. The phrase “bookkeeping” comes from the term “bookkeeper,” who is responsible for keeping the “books” for a company or organization. Luca Pacioli created the central system of manual double-entry bookkeeping more than 500 years ago. His accounting system is still in use today.
How To Set Up A Business?
Setting up your business is a relatively straightforward process.
First, you’ll need to create a legal entity- this will help you register your business with the government and get started taxing its profits.
Next, you’ll need to create a bookkeeping system- this will help you track your business’ financial data to make informed decisions about how to grow and how to start a bookkeeping business!
Finally, you’ll need to set up marketing and advertising strategies- this will help you get the word out there about your company and attract new customers.
Before the invention of computers, each firm would keep track of its sales and expenses on paper ledgers. The following were the primary books that companies were in charge of:
- The sales ledger keeps track of all invoices sent out and when payments are received. Credit control, often known as the accounts receivable function, is a process in more giant corporations that manages client accounts.
- The Purchase Ledger is a record of all purchases made and paid for; in larger firms, purchasing departments may charge this duty. It is essentially the company’s bank statement. However, there will be timing variations owing to uncashed checks (for purchases).
- Among the statements generated are a profit and loss account, a balance sheet, and a cash flow forecast.
- The asset book is a list of all the company’s assets. The information from these books or ledgers serves as the foundation for annual tax and corporate accounting accounts.
Steps On How To Start A Bookkeeping Business
Step 1: Structure
When it comes to starting a business, numerous factors need to be considerred. It includes a company name and logo, and a business plan. You can also choose to register your new business with ASIC or use an ABN and GST registration if you wish. Additionally, it is essential to understand the ATO view on starting a new business- check out the checklist for new companies for more information!
Step 2: Education
To be a proficient bookkeeper, you will need some initial reading and education in bookkeeping software platforms (MYOB, Xero, Reckon, Saasu) and some initial training from the software companies. You should also obtain your Certificate IV in Bookkeeping (including the BAS Agent skill set) and ICB Student.
Step 3: Register business
When starting a business, the first thing you need to do is register your business. This will allow you to hold onto your ownership and control of the company until it becomes successful! You can then obtain professional indemnity (PI) insurance to protect yourself from legal action if something happens wrong with your business. Once you have received at least one year of bookkeeping experience, apply for an ICB Practising Certificate and become an ICB Agent.
Step 4: Become Certified
If you maintain the above registrations and insurance, you will be certified as continuing professional education (CPE). You will also need to take the required CPE each year and take the ICB Annual Skill Review assessment.
How To Get A Bookkeeping Insurance?
Business owners need bookkeeping insurance as a condition of providing their service. Errors can happen, and professional indemnity insurance will help reduce the disruption to your business caused by unhappy clients and employees. In addition, it may also be necessary to take out Public Liability Insurance to cover yourself or your companies from claims from third parties for personal injury or property damage.
Types of insurance:
Professional Indemnity Insurance (PI)
If you are a professional business, PI insurance is an excellent option. It will protect your financial interests and help minimize disruption to your business. In addition, it can pay your fees if a dissatisfied client or employee refuses to pay you, covers the costs of rectifying a mistake made by them (including but not limited to legal fees), and protects you even if the claim against you is not valid.
Public Liability Insurance(PL)
Personal liability insurance (PL insurance) protects you from third-party claims for personal injury or property damage. For example, a workplace accident caused by someone stumbling over a computer cord. In public liability insurance cases, damages can easily exceed six figures, and insurers sell coverage based on the amount of exposure the company requires.
How Much Revenue Will A Bookkeeping Business Generate?
To know how to start a bookkeeping business, it is essential to carefully consider how much money you will be making and how much time you will need to devote to succeed. This decision depends on several factors, such as your experience and location.
It may be challenging to charge anywhere near $30 per hour for bookkeeping services in some cases. However, remember that this is a professional service that pays accordingly! Many consulting, troubleshooting, or problem resolution services can cost up to $100 per hour.
However, a profitable bookkeeping business will likely be good if it generates a healthy revenue. Additionally, you’ll need to research different industries and find out how much VAT (Value-added tax) and other taxes they charge, as well as what profits margin it requires to achieve profitability.
How To Find Clients?
You can find clients by advertising in newspapers, classified sections, and online platforms like Craigslist. You also can target specific businesses through your website or marketing materials.
The second way is to approach potential clients directly. This means meeting with them face-to-face and getting to know them better than simply writing letters or sending Emails. It would help if you took the time to go out for coffee or lunch and get to know them better before deciding whether you want their business.
Finally, there are certain areas where you may have an advantage over other businesses because of the concentration of customers that live there: technology companies, medical practices, etc.
What Are The Expenses?
Setting up your business is essential to know how to start a bookkeeping business. You will need to determine how much money you will need to budget for office space, equipment, and other necessary expenses. Next, you’ll need to understand the tax laws in your area. Many states have different taxation laws that will affect your bookkeeping business. It is critical to be knowledgeable about these rules to make informed judgments about setting up your business to be successful.
Most businesses operating from home don’t require any special startup costs, but you should investigate the types of insurance required – see below. Other fees may include:
-A computer of some description
-Back up hard disks
-Bookkeeping software to make life easier for you or at least an accounting software package that accountants endorse like Kashflow or Sage.
-A lot of printing paper
-Storage cabinets (may be necessary if your business is located in a rural area).
You can also read: How Much Does It Cost To Start A Business?
Create a successful bookkeeping business
To start a successful bookkeeping business, you’ll need to understand the basics of bookkeeping. This article will teach you everything you need to know on how to start a bookkeeping business. From setting up your business structure to understanding the tax laws in your area, this guide will help make starting a bookkeeping business an easy and successful experience. You can find everything you need, including templates and guidance, free. The Xero bookkeeping partner program has a range of resources for you to get started.