How to start a bookkeeping business

If you’re thinking of starting a bookkeeping business in the UK, there are a few things you need to know. First, bookkeeping is a regulated profession, so you’ll need to be qualified and registered with the Institute of Certified Bookkeepers. Second, it’s important to have a good understanding of both self-assessment and corporation tax returns, as well as VAT returns – bookkeepers are often responsible for preparing and filing these on behalf of their clients.

And finally, you’ll need to be comfortable using accounting software such as QuickBooks or Xero, as most businesses now expect their bookkeepers to be able to use this type of software. If you’re confident you can meet all of these requirements, then starting a bookkeeping business could be a great way to earn a good living from home

A bookkeeper maintains records for local businesses and occasionally private individuals. The following guide will walk you through everything you need to know about starting up and successfully running your very ownbookkeeping business venture.

What’s the difference between a bookkeeper and an accountant?

The difference between a bookkeeper and an accountant is that the bookkeeper is responsible for recording financial transactions, while an accountant is responsible for analysing and interpreting financial information. A bookkeeper typically keeps track of a company’s income and expenses, as well as its assets and liabilities. An accountant, on the other hand, may also prepare financial statements, tax returns, and budgets.

In addition, an accountant may provide advice on financial planning and investment decisions. The distinction between a bookkeeper and an accountant is not always clear-cut, but in general, an accountant has more training and experience in financial analysis and decision-making.

Rules and regulations to comply with

As a bookkeeper, you need to comply with money laundering regulations in order to satisfy a legal requirement. By doing so, you will help to reduce the risk of your clients laundering money. One way to comply with these regulations is to obtain a HMRC money laundering license. This license will allow you to provide bookkeeping services to clients who are at risk of money laundering. In addition, it will also help you to identify potential money laundering activity and report it to the authorities.

As a result, complying with money laundering regulations is essential for bookkeepers in order to protect their clients and themselves from the risks associated with money laundering.

Get insurance so you’re protected

As a bookkeeper, you play an essential role in helping businesses to stay organized and compliant. From tracking expenses to preparing tax returns, bookkeepers provide a vital service to businesses of all sizes. However, mistakes can happen, and even the most careful bookkeeper can be sued for errors or omissions.

Professional Indemnity Insurance protects you against claims made by unhappy clients and your employees. In the event that you are sued, your insurance policy will cover the cost of your legal defense, as well as any damages that may be awarded.

Without insurance, you could be left financially responsible for the cost of a lawsuit, which could easily bankrupt your business. Therefore, it is essential to have Professional Indemnity Insurance in place before you start your bookkeeping business.

Estimating demand for your bookkeeping services

If you are thinking about starting a bookkeeping services business, it is important to determine whether there will be enough demand. There are also accounting firms of all sizes that offer bookkeeping services, and many of them can provide clients with a wider range of services than you can (e.g., preparing the client’s annual accounts, undertaking an audit, or offering financial services). In addition, online accountancy practice and bookkeepers are increasingly competitive, attracting clients across the country.

More and more businesses use bookkeeping software to keep track of their financial transactions. Your role should complement the one of your client’s accountants, so you must make sure that the services you plan to offer will appeal to potential clients. Providing a more personalised or cheaper service, for example, may be possible.

Businesses are required to keep digital records of their business and submit quarterly returns to HMRC based on these records under Making Tax Digital (MTD).

Businesses with a turnover above the VAT threshold are subject to MTD for VAT purposes. From April 2023, MTD will extend to income taxes.

Business owners may be able to offer bookkeeping services more widely due to the increased record keeping burden imposed by MTD. This will allow them to focus on what they do best – running their business – while their bookkeeper takes care of the MTD record keeping.

If your clients decide to install the necessary software packages, you will need to make sure that you are familiar with the MTD requirements.

Outsourcing bookkeeping is generally preferred by businesses for the following reasons:

• As a result of their inexperience, they are unaware of what records should be kept, and in what format
• They should make sure their VAT, PAYE, and tax returns are submitted on time
• It would free up some of their precious time since they are too busy undertaking their core activities

Businesses, especially smaller ones without a bookkeeping department, have many reasons to outsource their bookkeeping with MTD.

Take time to examine the area where you plan to operate, so that you can:

• Take a look at the competition
• Estimate how many business clients you will have
• Make sure you are satisfied with the fact that local businesses are thriving and that new ones are being encouraged to open
• Choose the range of services you will provide

Find out what bookkeeping services businesses want

You might begin by visiting several small and medium-sized businesses in your area and discussing the possibility of outsourcing their bookkeeping. We should discuss the following topics:

• Invoices, till rolls, sales receipts, records of patients or clients, etc., relate to their business and what paperwork is required.
• How often they would like their records updated, for example, daily, weekly, or monthly
• Whether the services would be provided at your premises or theirs
• Do their VAT returns, prepare monthly management accounts, handle payroll and pension auto-enrolment, etc.
• Having the ability to explain MTD and assure them that you can handle this is a good way to sell your services.

You can estimate the cost of their project based on the information they provide, including time taken, travel expenses (where applicable), and so on. They will also let you know if you are too expensive or if they bite your hand off if you are a bit too cheap. In addition, you will be able to determine which services are most in demand.

In addition to businesses, a housing association, charity, church, or sports club might benefit from your services.

Online bookkeeping services

Providing online bookkeeping services to clients nationwide is a possibility that shouldn’t be overlooked. You would then be able to work on your clients’ income and expenses, including employee pay details, using specialist cloud-based bookkeeping software. If your website offers bookkeeping or accounting services, you’ll need to make sure it appears in online searches.

Which clients will use your bookkeeping business?

Your market

Small and medium-sized businesses are most likely to be your clients. Although you might be able to provide services by email, post, or online, most of your clients are likely to be local businesses.

They might be start-up businesses totally unaware of the types of records that should be kept, the format in which they should be kept, tax, PAYE, VAT, and payroll requirements, and so forth. As they grow and prosper, you can expand your range of services to them – provided you can keep your fees affordable.

The proprietors of established businesses will spend more time each week handling bookkeeping requirements that become increasingly complex. Clients of this type of benefit from outsourcing their bookkeeping to a specialist since it frees up valuable time. Furthermore, tax and legal requirements are met, and all records are processed correctly. As a result of keeping the records in a way that is easy for the accountant to use, the business may also benefit from a reduction in their accountant’s fees.

Your service will provide you with monthly reports (called management accounts) that will enable you to monitor the performance of your business, regardless of its size.

It may be a good idea to freelance your bookkeeping services to local accounting firms who need extra help during busy periods.

Establishing the bookkeeping services you’ll provide, when you’ll do so, and the fees that you’ll charge a new client is a good idea.

Discounted bookkeeping services

Charity organisations, churches, clubs, etc., might benefit from a discount.

The prices for certain bookkeeping packages vary, for example Accounting and Bookkeeping and Payroll. Clients who take multiple packages might be eligible for a discount if you do this.

Decide what bookkeeping services to offer

What range of services will you offer

Depending on your business model, you will offer the following services:

• It is important to take into account the nature of the business of your clients (and the skills, expertise, and training you have)
• The size of your business’ premises

These are some of the bookkeeping services you would be likely to offer clients:

• The processing of all business documents (such as purchases, sales, ), including those related to e-commerce
• Maintaining all appropriate ledgers
• Credit control
• Bank reconciliation
• Stock control
• Monthly management accounts and reports
• Preparation of annual accounts (final accounts for sole traders, draft final accounts for corporations)
• Payroll services
• VAT returns and reconciliation
• Self-assessment tax returns
• Paying VAT, PAYE/CIS and tax on behalf of clients online. Visit Gov.uk to learn more about enrolling as an agent for online services
• Pension auto-enrolment services

In order to comply with Making Tax Digital (MTD), your clients’ records will have to be maintained digitally and they will have to file quarterly returns with HMRC. In order to comply with HMRC’s MTD requirements, you must be familiar with the software required.

Your services may be tailored to the needs of a particular client. For instance, your duties might include managing a golf club’s membership list or handling subscriptions for a magazine publisher. If you are interested in bookkeeping, e-commerce, or expenses claim packages, you might consider becoming an authorised reseller, installer, and trainer. During busy periods, some bookkeepers also assist local accountants.

It might be worthwhile to offer other services if you have the space and staffing to do so, including:

• CV preparation
• Copy and audio typing
• Photocopying
• Faxing
• Telesales
• Mailshots from client’s database

Advertising your bookkeeping services

Your potential clients should be aware of your bookkeeping and business services, regardless of what you decide to offer.

You can promote your business in a number of ways:

• Local newspapers and directories can be used to advertise
• Set up your own website that explains what you offer and how it will benefit your potential clients. You can highlight on your website that you are a software re-seller
• You will be included in Find a Bookkeeper’s online directory if you join the Institute of Certified Bookkeepers or the International Association of Bookkeepers
• Keep your services in the public eye by participating in the local business community
• Be sure to inform local trade associations that you specialise in a particular sector of the market
• Provide your target clients with leaflets that you have printed
• You might be able to get recommendations from local accountants
• Connect with other professionals on LinkedIn
• Get referrals by demonstrating your bookkeeping skills on social media like Facebook and Twitter
• Blog about bookkeeping and participate in online business forums
• To benefit from word-of-mouth referrals, ensure your services are always reliable and of top quality

Your fees

How will you decide on the level of fees to charge?

There will likely be a pressure on you to keep your fees low, especially when the economy is down. It is natural for businesses to want to keep costs as low as possible.

Nonetheless, it’s crucial to ensure that your service fees cover all of your operating costs, including your own drawing costs and staff wages.

Fees should take into account the following factors:

• Time required for each task
• Each task’s complexity
• What level of responsibility you have agreed to accept
• If you incur any expenses (for example, travel, postage, etc.)

Payroll administration is an example of a specific, regular task you could charge a fixed monthly fee for. All records should be kept, payslips produced, and RTI files sent to HMRC online. Charges could be made per entry, plus additional charges for printing statements, sending out payment reminder letters, etc. After Making Tax Digital (MTD) is implemented, you will probably aim to charge your clients a fixed monthly fee for their digital record keeping and quarterly returns.

Bookkeeping services are typically priced between £22 and £25 per hour, according to the Institute of Certified Bookkeepers. New clients are sometimes offered a discount – for example, for the first month.

Investigate your immediate competitors’ rates. It is possible to find out what a bookkeeping firm charges by looking at their websites. While your rates must be based on your costs and the income you expect, staying broadly competitive is also important.

Also, keep in mind that some of your clients may decide to handle more straightforward recordkeeping tasks on their own because bookkeeping software has become so easy to use (even though the software required for recording and quarterly returns under MTD may be harder and more time-consuming to use). It’s still important to pull together all the figures, but they may not be willing to pay for what they consider ‘number crunching’. When offering your services to your clients, it’s important to explain to them what the figures mean – what their business is doing and how they can improve it.

Buy an existing bookkeeping business

Instead of starting your own bookkeeping business from scratch, you might decide to purchase an existing one. If you buy a going concern, you will already have customers, regular sales, staff, premises, and equipment.

If you don’t possess the right skills and experience, such as legal and financial expertise, buying a business can be risky and expensive. To avoid paying an excessive price for the business, establish the true trading and financial position.

A bookkeeping franchise might also be a good option for you. Your clients’ records can be accessed in real time through online web based (‘cloud’) software.

Read more: Bookkeeping industry sector trends