What is a bookkeeping business?
In a nutshell, a bookkeeping business is a service based business that keeps track of financial information for others. I have run my own bookkeeping business for 10 years now. At has been pretty successful overall. Thought I’d share some information based on my experience for those of you that might be thinking of starting your own bookkeeping business.
It can be a rewarding and profitable business if you enjoy working with numbers, which I do. It’s an absolute certainty that 2 + 2 will always equals 4. I find such satisfaction in a reconciled account. It’s like a puzzle that you have to put all the pieces in place to get the final picture. And the final report is the completed picture.
Just a side note in case you’re wondering. You don’t have to be a CPA to offer accounting services. I am not and have no intention of becoming a Certified Public Accountant but I understand accounting very well. That’s why I choose to use the word bookkeeping instead of accounting. I don’t want to misrepresent myself.
So why would a business owner contract you to do their books instead of hiring an employee whose hourly rate would be considerably less than what your fees are? Lots of reasons! When all is said and done, they’ll likely be paying much less in your fees than the cost of any employee. When you consider things like;
Payroll taxes – Not only do they pay the hourly rate of that employee. They also pay federal taxes, unemployment, and workers compensation for each person in their employ.
Employee benefits – When you take time off they don’t have to pay you for it. They also don’t have to worry about your health insurance, retirement, or any other benefits they make available to their employees.
Office space and equipment – They won’t have to provide a space for you to work or a computer, printer, and filing cabinets for you to perform your duties.
Supervision expenses – No need for someone to oversee your department or make sure you’re working efficiently. And you won’t require any training to do your work.
Bookkeeping refers to the actual recording of transactions.
Accounting includes recording the transactions, but also interpreting, classifying, analyzing, reporting and summarizing financial data.
You can offer strictly bookkeeping services if you like, but I found that most clients wanted the summarized information. So my job is to process all of their information and give it back to them all organized with a nice Profit & Loss report attached.
Being a business owner does not automatically make someone an expert in accounting.
They are an expert in whatever field their business is. Do you know what I mean here? For example, a caterer is an expert in the field of catering. They understand how to prepare large quantities of food, transport it to their client, display it beautifully, and serve it to the customer. I find it a challenge to get ready for a holiday dinner with the kids! So I think I’ll stick to the numbers.
You could specialize in a certain type of accounting. If you have a caterer as a customer, you’re going to become very familiar with the type of accounting services a caterer needs and what information they want to see on their reports. So it just makes sense to seek out other clients in the same industry, right?
Let’s take a look at the actual “work” you’ll be doing.
You’ll be collecting information from your clients. Sometimes this will mean meeting with the client and collecting papers, receipts, statements, bills, etc. When starting out with a client, I like to tell them if it has to do with money coming into or going out of your business, I want to see it. At first I’ll end up getting lots of paper, a good bit of that I won’t end up needing eventually.
I can’t tell you how many Walmart bags or shoe boxes full of wrinkled up paper I’ve sorted through over the years. Some bookkeepers don’t like having to deal with the mess. They strictly want to post transactions.
For me, it’s not a problem. One, I love to organize things and two, that’s billable time. I make sure the client knows this up front. I find that most business owners are fine with that if it means they don’t have to mess with it.
Looking over the receipts and bills and such in the beginning helps me get to know that particular client. You’d be amazed how much you learn about a business when you do their books.
In some cases, you’ll get most of your information virtually. Downloaded bank statements, emails, and even the occasional texted picture of a receipt. It’s handy to work this way and opens the door to virtual accounting services, in other words, you don’t physically meet with the client. They send you their information and you send back reports.
The first thing you’ll need to do (obviously) is to organize the information you’ve been given. I like to sort it into stacks of statements, loan documents, bills, invoices, and receipts. Then I refine each stack by account and date. Now you’re all ready to post those transactions.
Although you can absolutely do this by hand, if you so choose, the majority of us are going to use accounting software.
There are several to choose from. I’ll be going over some of them in another post. But the most familiar one to most of us is QuickBooks. I love QuickBooks. It’s a user friendly yet robust software that makes bookkeeping a breeze (to me anyway).
I like to start with the bank statements and work my way down to the receipts. Usually by the time I get to the receipts most of them have already been posted. But there may be more detailed information on that receipt that you’ll want to note with the transactions.
After all of the transactions have been posted it’s time to reconcile the statements. Then after that’s done, I like to run a profit and loss report and a balance sheet for the time period I’m working in. I check all the entries that make up each of the numbers to make sure their posted correctly. Then I look at the report as a whole. Will the client be able to make sense of it? Did I use the correct type of accounts for them? Did I include enough detail?
Once you’re satisfied that the reports are ready for your client to see, print them out and put them on top of all of the sorted documents that you created them from and get them back to the client, along with an invoice for your work.
So now you’ve got an overview of the bookkeeping process, next let’s talk about the money. How much will you charge for your services? Will it be by the hour? By the document? By the month, quarter, or year? That’s a decision you’ll have to make for yourself.
It’ll help to do a little research on what other bookkeepers in your area are charging and how they bill. Keep in mind that you are providing a very critical professional service that absolutely every business needs. Don’t sell yourself short.
You have skills, knowledge, and training to do this type of work that the business owner typically doesn’t. And they don’t care to either. I base my fee on the type and quantity of work that I’ll be doing.
Sometimes that means that a monthly fee is more beneficial to me and to the client. They don’t necessarily want a breakdown of everything I do and exactly how long it takes me to do it. They want to know how much the end product (the reports) are going to cost them.
Besides that, the more you do something the quicker you tend to get at it. I might be able to do in one hour what would take the client a week to try and do on their own. So I don’t recommend an hourly rate. Rather consider a flat rate per month, or perhaps a per transaction type of charge. Don’t forget to include your travel time, phone calls and emails, office supplies, etc. when deciding what your fees will be.
Although QuickBooks offers a ton of reports. The main two financial reports that I find most clients are interested in are the Profit & Loss and the Balance Sheet.
A Profit & Loss report shows you what happened within a given period of time. How much money did they actually receive, what expenses did they pay, and what was left if anything after it’s all said and done.
A Balance Sheet shows you a snapshot of your business on a given day. How much you have, how much you owe, and how much you have invested in your business.
It can be very satisfying to a business owner to actually see in print the results of their doing business.
The last subject I want to touch on today is confidentiality. This is of the utmost importance in a bookkeeping business. You will be privy to some very confidential information of your clients. It’s paramount that you treat that with respect. No one should ever see another client’s information lying around in your office for example. And absolutely never should you share any of a client’s information with someone else without their explicit permission to do so.
Although, I have on occasion shared a situation in reference to someone else’s situation, I don’t say who it is and I never mention any numbers. For example I might say that I know of someone who had a similar situation with that particular vendor and this is what worked for them.
We all tend to be sensitive about our financial information. Treat your clients with the respect and privacy they deserve and you will build a long and mutually beneficial relationship with them and an excellent reputation and reference for your bookkeeping business.
If you have any questions about running a bookkeeping business or some ideas you'd like to share leave me a comment below.
To Your Continued Success,