Start a Bookkeeping Business in 8 Steps

The activity of keeping record of monetary business transactions, as part of an accounting process, is referred to as bookkeeping. A bookkeeping business comprises of handling income and expenses, along with additional functions such as preparing tax returns, processing payroll etc. In order to start a bookkeeping business, an individual must have a business plan ready and a strategy to acquire clients. An individual must think through about the business model he/she plans to operate i.e. setting up a bookkeeping firm as a sole trader, a Limited Liability Company, or even in partnership with a different bookkeeper. As a bookkeeper, the key books managed by a business are:
  • Asset book – recording total assets owned by an organisation/company
  • Cash book/ledger –recording payments and receipts of money
  • Purchase ledger – recording all the procurement done and date of receipt of payment
  • Sales ledger –recording all the bill of lading generated when payment is received. In bigger companies, there is an accounts receivable or credit control function to handle customer accounts.

1. Become a Certified Bookkeeper

A certified bookkeeper is an individual who demonstrates familiarity, expertise and work experience to carry out the responsibilities necessary for a bookkeeper. The Institute of Certified Bookkeepers (ICB) is the leading institute for bookkeeping across the world. It encourages and upholds the principles of bookkeeping as a line of work through the setting up of pertinent credentials that recognise educational accomplishments, competencies and work experience. ICB aims to:
  • Promote bookkeeping as a line of work
  • Augment recognition for bookkeeping as an essential portion of the financial line of work
  • Promote bookkeeping education and learning
  • Empower the accomplishments of a familiar bookkeeping qualification
  • Provide a trustworthy standard for the profession
  • Improve the profession prospects of ICB members
Along with becoming a certified bookkeeper, an individual should also think about achieving expertise in leading accounting or bookkeeping software such as Nomisma Solution.

2. Create a Business Plan

Preparing a business plan is imperative for everyone who thinks about actually starting his/her bookkeeping business. The introductory part of a business plan is an executive summary of a business – details about the nature of business, business overview, who are the key responsible people, what is the business strategy and future plans. While preparing a business plan, a bookkeeper will be able to think about various aspects of the business. Additionally, a bookkeeper should also prepare a financial plan that must take account of a 12-month forecasted Profit and Loss account, forecasted Cash Flow, and a forecasted Balance Sheet. A business plan takes into account all the fundamental concerns of a business, from an elevator pitch to a revenue model of a bookkeeping business. Whether a business is a start-up, evolving or established, every person should have an answer to these concerns and these concerns must be reassessed over time. Fundamental heads that must be encompassed in every single business plan are:
  • Cover page
  • Brief summary of the business and its operations
  • Overview of the business
  • Competitor landscape
  • Plan for marketing the services such as bookkeeping services
  • Initial cost to operate the business
  • Financial estimates

3. Incorporate Your Bookkeeping Business

One of the initial concerns is the nature of entity to be incorporated. This is usually determined by evaluating the ownership, purpose, management and liabilities of a business. The most prevalent corporate structure that is established in the United Kingdom is that of a private limited corporation, which is incorporated in accordance with the Companies Act 2006. Key areas to be addressed include:
  • Constitutional documents comprising of ‘The Articles of Association’ and ‘The Memorandum of Association’
  • Company name that is distinctive, should not contain a sensitive expression or word, and is not offensive. Also, the company name cannot encompass certain signs, characters, symbols (@, # etc.), and the usage of any word in ‘association to royalty’ cannot be used
  • Registered office – where formal communications will be directed, such as letters from HM Revenue and Customs (HMRC) and Companies House
  • First officers consisting of directors, company secretary
  • Statement of capital – details of a business’s share structure and value
  • Persons with significant control – an individual who meets the conditions concerning voting rights, share ownership, appointment of directors etc.

Steps to Set-up a Limited Company

1. Check if establishing a limited company is the correct choice. The incorporation structure of the business has an impact on taxation and getting funds. A bookkeeping business can verify if setting up either of the following can be beneficial:
  • A sole trader or self-employed
  • A business partnership
  • An overseas company
  • An unincorporated association
  • A social enterprise
2. Decide on the name of the company 3. Appoint company secretary and directors 4. Decide who the guarantors or shareholders are 5. Prepare documents pertaining to the operations of an organisation 6. Register an official address and select a SIC code

4. Set Up Business Operations for Your Bookkeeping Business

Once a company has been incorporated, a bookkeeping business can work towards setting up operations like setting up a business bank account, establishing a business mailing address, getting bookkeeper insurance etc. It is imperative to keep the business finances separate from personal finances – this supports the limited liability status. Additionally, a mailing address is essential as it facilitates communication with customers, and official authorities such as Companies House, HM Revenue and Customs (HMRC).

5. Get the Right Accounting Software

It can be an overwhelming task to determine the software to be used to manage various aspects, including bookkeeping/accounting, of a business. Cloud-based bookkeeping/accounting software such as Nomisma Solution can help an organisation to operate effectively. While numerous small businesses in the United Kingdom are using Nomisma Solution, it is advisable to take up additional certification to enhance technical skills. This bookkeeping/accounting software offers a payroll processing option that can be used to process employee wages, NICs etc. Also, the taxation feature can assist in filing the returns in a timely manner, thereby, keeping the business compliant.

6. Fund Your Bookkeeping Business

Once a business plan is prepared, a bookkeeping business will have a fair idea about the projected start-up costs. It is advisable to always have an amount equivalent to at least six month's worth of expenses in the bank. In order to enhance the liquidity, a business credit card can be a useful monetary tool to aid the business with cash flow or essential expenses early-on in the business. Managing the purchases and expense of a business can prove to be challenging, thus a business credit card with comprehensive once-a-month billing or online administration could be a worthy solution. Additionally, a business credit card can also aid in cash-flow management by procuring a credit card that provides interest-free credit period up to 59 days on purchases.The table below provides a swift comparison of the topmost providers for business credit cards in the United Kingdom.

7. Set Up a Home Office for Your Bookkeeping Business

A bookkeeper can start operating from home as long as he/she has sufficient space to manage client’s paperwork and store it (useless he/she is using a cloud-based bookkeeping software). A bookkeeper must prepare a checklist to highlight all the essential papers that are needed for a client to prepare the financial accounts. Most bookkeepers working from home have marginal start-up costs, and should also examine the nature of insurance required. Other costs may consist of:
  • A computer to prepare some reports
  • Ample amount of printing paper
  • An supplementary answering service or telephone line
  • Back up hard disks
  • Bookkeeping software to make operations easier
  • Marketing costs to sponsor the services
  • Postage charges
  • Storage cabinets

8. Market Your Bookkeeping Business

Building a bookkeeping business can be tough, as numerous bookkeepers are operating in a crowded marketplace. Word of mouth is a fundamental way for spreading the brand message across prospective clients. Also, utilising the network of existing customers can help to build new relationships and acquire new customers for the business. Furthermore, social media provides a world-wide audience, however, it is imperative to understand the correct digital and social channels for clients and using them effectually for the business.