The Definitive Free Guide To Bookkeeping For Beginners
Guide to Bookkeeping last updated May 2019 by Quentin Pain
Introduction And Guide To Bookkeeping as a Business, Career or Skill
Whether you want to be a self-employed bookkeeper, do the bookkeeping for your small business, or be employed as a bookkeeper, this simple guide to bookkeeping will point you in the right direction.
And it will not waste one minute of your valuable time. I want to stress that now so you know that everything you read below will help you get what you want (I’ve founded 6 businesses over the last 39 years including a successful and accredited bookkeeping service – so I understand what a big step this may be for you).
This guide is aimed at 3 groups of people:
- People who want to be self-employed bookkeepers by starting their own bookkeeping business.
- People who are in business doing something other than bookkeeping, but want to save costs by doing it themselves.
- People who are seeking employment in the bookkeeping and accounting industry.
There are many things shared in common with these three groups, so I will only point out differences where absolutely necessary.
For example, if you want to start a career as a bookkeeper, it’s a good idea to know what sort of salary you can expect (if you’re in the UK, the UK Government reckons it’s about £17-£25k, and if you’re in the USA, the last figure I have is $36k from the Bureau of Labor Statistics).
Whereas if you want to start your own bookkeeping business, you will also want to know what the current salary levels are in case you want to grow your business and take on qualified bookkeepers.
And if you want to learn bookkeeping as a business owner, then knowing what it would cost if you were to hire someone instead will help you make the decision of whether it is really worth your time.
On that last point, all businesses depend on marketing for survival. And marketing is all about time and budgets. If no budget is set for marketing a business (including bookkeeping businesses!) then it is very unlikely a new business will thrive.
Established businesses often get by with word of mouth marketing, but eventually they will decline as other rivals with a marketing plan and budget to match will move into their market.
And understanding what that budget might be just also happens to be a part of the bookkeepers set of skills. We’ll get to that later on, but for now, you will be able to see just how important the work of a bookkeeper really is.
It’s not just about adding up numbers and deciding where a particular transaction needs to be recorded in the books, it’s all about knowing how much money in the business can be used in other areas that need it.
Since the bookkeeper is the one person with their finger on the financial pulse of the business at all times, the amount of power a good bookkeeper really has becomes apparent.
This skill set has been overlooked for years by the accountancy profession as a whole, and even more so by business leaders. This is because larger businesses rely on a financial director (usually a qualified accountant) who in turn relies on bookkeepers to come up with the figures.
So it’s the bookkeepers who really know what’s going on. Welcome to the Bookkeeping Industry.
Starting Your Own Bookkeeping Business
I’ve written a 5 part mini guide on this topic as part of the Accounting for Everyone Certified Online Course, which you can find here, but I’m going to include lots of tips in this article that I know will help you anyway.
These are based on my actual experience of setting up a real bookkeeping business in the UK.
Starting your own bookkeeping service is probably one of the safest lifetime businesses you can start.
The entire world is going freelance. The number of small businesses starting up is and has been increasing for a considerable amount of time, but right now it’s increasing faster than ever because everyone known ‘jobs are no longer for life’.
A university degree no longer has the benefits it used to have, and as a self-employed bookkeeper there’s no one you need to impress – your clients certainly won’t care. In fact, the debt that university students get into whilst studying has never been higher. And that is a real burden not just on themselves but on the world’s economy as a whole.
Learning bookkeeping has as a result become super important for any business owner, but since the last thing most business owners want to do is their own bookkeeping, it ends up being done by untrained volunteers (usually a family member), and that adds even more risk to the burden small business owners have to face.
And so it doesn’t take long for them to realise they need professional help.
One answer to that is finding themselves an accountant. But the problem with that solution is the increased cost. Accountants train for years, and so expect a healthy return for all that training.
A bookkeeper can become quite competent in less than a year – even though it’s the most important part of the finance side of all businesses.
This is because the tax legislation of every country far outweighs the amount of knowledge needed to operate a double-entry bookkeeping system.
There is one caveat to that: a bookkeeper must learn where transactions go in the books. They need to know the difference between a capital purchase and an expense.
They need to know the difference between selling a service and selling goods. They need to understand VAT (Europe and much of the rest of the world) and Sales Tax (USA).
But what they don’t need to know are all the tax avoidance schemes and other forms of tax accounting that reduce or avoid the tax burden. That is strictly in the focus of accountants.
And here’s the rub. The world’s Inland Revenue services are changing fast. It is no longer publicly acceptable for large corporations to use tax avoidance schemes.
It’s not just politicians who want to change things, it’s the public as well. So it won’t be long before the crackdown comes not just for all schemes, but also for smaller businesses too.
The good news, is that it falls right into the domain of the bookkeeper. A professional bookkeeper is there not just to enter the figures and make sure they go into the right boxes, they’re there to protect business owners from making costly mistakes.
At some point in the future, the average business owner will not need an accountant at all. Governments and Inland Revenue Services around the world will make online submission so easy, and the rules so hard to break, anyone will be able to file their figures online without needing a complicated manual.
But the point is, those figures will still need to be generated in the first place, and the people most qualified to do that, are professionally trained bookkeepers.
As I say, it’s one of the safest professions you can ever choose to enter, and more so now than at any other time – hence the need for this depth guide.
Getting Started With A Bookkeeping Business
Starting a bookkeeping business is just like any other business. You need to register with your Inland Revenue service to let them know.
You may also need to register with them for Anti Money Laundering supervision. This all depends on your country of course. In the UK, you can do this directly, or through a professional body such as the IAB – International Association of Bookkeepers (who also operate in 60 countries at the time of writing).
It will also help you gain trust by getting professional qualifications. The IAB can help in this respect too. They also cover distance learning as well as formal college courses.
You can start your business direct from home. There is no need to increase your costs by renting an office unless a) you can afford it, and b) you or your family has a problem with you working at home.
Another benefit of offering bookkeeping as a service is you will have very few other costs other than your time. Software comes into it, but these days you will find plenty of free software for micro business books, and fairly low cost solutions for small to medium size businesses.
You will also find the larger the business you target as potential clients, the more likely they are to want you to do your work on their premises. This has ups and downs, especially when it comes to charging for your work. They will want to pay you an hourly fee. Typical hourly charges for experienced bookkeepers in the UK vary from £20 to £35.
That rate is very similar for most countries but has to be pro-rated in for that countries economy.
If your clients are happy for you to work remotely on their account, then you can change to monthly or project charging.
Another vitally important part of any small business, but extremely important for professional services such as bookkeepers, is Professional Indemnity Insurance (PII). This will cover you should something bad happen to your clients and they end up suing you for some reason.
That brings us on to contracts and terms and conditions. Many bookkeepers take on clients without setting up any formal agreements. Don’t do it. Even if your terms and conditions are simple, make sure you have some, and get a signature that they agree to them. In fact, the simpler the better.
This means setting up expectations around responsibilities. Make sure everyone involved understands who is responsible for what, and what to expect of each person BEFORE you start.
This will ensure that should you accidentally take on bad clients, you will find it very easy to exit without any impossible problems.
How To Market Your New Bookkeeping Service
Naming Your Service
What are you going to call your new bookkeeping service? Names are always hard (every parent knows this only too well of course – and if this is your first business, it’s going to feel a lot like your baby – you will get very precious about it, so the name matters).
The absolute simplest name to use is your own – but if you don’t much like your name – or you want to remain anonymous, you can always use a made up name. It’s what many of the most respected authors on the planet do – so you will be in good company (it’s not weird – and you get the chance to give your baby bookkeeping service the name you always wanted).
Alternatively, you can go for a brand style name. I originally named my bookkeeping service AccountsCheap. I did it because the service helped micro businesses, and so was right at the bottom end of the market. My clients (mostly) could not afford an expensive service, so their expectation was matched to the name.
And here’s the thing about names, the perception of the name happens slowly as you build your business. The meaning of the name will be built from the reputation you establish. In other words, names don’t actually matter that much (but see my one warning below!). It’s your service that matters. This is why Google (a completely meaningless name) now has its own brand value and perception.
It’s why Apple is more associated with a computer company than a fruit in business terms.
But avoid names that are hard to pronounce or misspellings of existing words. I founded a software company in 1999 and named it Accountz. Every time I picked up the phone and gave someone my email address I had to explain “that’s accountz with a z not an s”.
You can also use your town as the name if you want to stay local. One choice of name I had was Wisbech Bookkeeping Services, which I set up anyway to increase the likelihood of being found online.
Warning On Business Names!
One last point on names. Sometimes they can backfire. The AccountsCheap service had an achilles heel that I hadn’t thought through properly. Given enough time, I would have stuck with it, because I know reputations take time to build, but we didn’t want to wait that long.
We discovered that clients who wanted to recommend us, had a problem with being associated with the word ‘cheap’. They wanted cheap, but not its association to their own business. So we changed it to A4Accountants, and just like that, we were now seen as professional.
SEO Your Local Bookkeeping Service
I quickly got that site to No 1 in Google searches for local bookkeeping practices by putting up great content based on the fact it was a bookkeeping service and operated in my local area. You can do this too (or get help by joining my SEOExpert.help group.
The first thing to do is get your site listed on Google for Business. This is fine whether you are working from home or an office. Search for ‘Google my Business’ and follow the instructions to get your business listed.
Next, put up a page with relevant content to not just your bookkeeping practice, but also your local town. Include images of local landmarks. This builds trust (even if you are a national service).
Then schedule in a series of pages, each devoted to the different areas your business covers (both geographically as well as from a services offered perspective).
If you offer accountancy services as well as bookkeeping services, make sure you mention that. And make sure that you use those keywords enough times to ensure Google and other search engines understand what you do. But VERY IMPORTANT, don’t overuse those keywords. 2% is a safe maximum (that is, 2 in every hundred words can include those keywords).
What matters more than anything else, is the length of the articles you include. The longer the article, the more opportunities you have to influence search engines that the article is important to your industry.
Make sure you include HTML meta tags for the page title and description. This is what Google and other search engines are most likely to use when displaying your page in the search results – and of course, they are the first thing potential clients will read – so they matter more than anything else (this sort of thing is all covered in depth for complete beginners in SEOExpert.help).
Essential Paperwork For Bookkeepers
There is more to ‘paperwork’ than you may think! But the most obvious paperwork is (of course!) Receipts.
That’s what we’re look at next in our definitive guide to bookkeeping. Read on.
Your Inland Revenue service (no matter where you live) demand one thing more than anything else – proof of expenses and purchases.
Since that affects bookkeepers of every kind as well as their clients (and every business in the world come to that), it makes sense to start here.
After this mini-section, we’re going to take a look at the legal side of paperwork, but let’s get back to what matters most – receipts.
For a receipt to be of value it must include the following:
- Date of purchase (without the date, no one can tell which accounting year this belongs to – in other words, no date = potential fine for having no proof of purchase and trying to claim for it)
- Amount (whatever the amount is must match exactly with your books – otherwise there’s no proof this is the receipt you’ve accounted for)
- Seller (you need details of who this receipt was from – no seller = no proof at all – you may as well have just made up the receipt yourself – which is kind of how ponzi scheme work!)
- Invoice number (this is the ultimate proof that what’s on this receipt/invoice will match the seller’s own record of the sale)
- Description (what was this receipt for?)
- Tax details (if you’re able to claim back any sales tax, VAT, GST etc., then you’re going to need proof that it was charged in the first place – some receipts will break down the actual amount, some won’t depending on how much the total amount was and the legal laws of the country)
Talk to any bookkeeper or accountant about missing receipts, and the most common expression you will find is ‘read them the riot act’. Which means when a client wants the professional bookkeeper to enter a receipt to claim against tax, and supplies no evidence for the purchase, it’s time to read them ‘the riot act’ so they understand that the risk is not just to them, but also to the professional.
So the golden rule in accounting is KEEP ALL RECEIPTS.
The good news though (in many countries) is that your paperwork can be kept electronically. Hard copies (ie. paper copies) are no longer needed in many jurisdictions provided a legible electronic copy exists (check with your Inland Revenue service for the law in your own country).
Some countries, such as the UK, operate this policy, but still have exceptions, one of which is the legal requirement to keep paper copies of tax related charges from HMRC (the UK’s Inland Revenue service quaintly known as Her Majesties Revenue and Customs).
And most cloud accounting software now available lets you upload electronic copies of your paperwork and attach them to the actual transactions in the bookkeeping system.
This is an excellent way to keep all your accounts in one place (make sure you keep backups though – without physical paper, you are far more vulnerable to loss).
Invoices issued out are of course where receipts originate from, and most of the same rules above apply here too.
Inland Revenue services need to see copies of invoices just as much as they need to see receipts (ie. where those invoices ultimately end up). This completes the invoice cycle, so under investigation, an auditing company or inland revenue service will be able to track the complete cycle by matching invoice to receipt.
Interestingly though, revenue services are far more interested in receipts, since these are prime documents that reduce tax. It’s helpful to remind ourselves that a receipt and an invoice are the exact same thing (the only difference being that an invoice may be unpaid, whereas a receipt is always paid).
Professional Bookkeeper Client Contracts
Every professional bookkeeper (or accountant) needs certain documents in place – and for many reason including legal ones.
Here’s a list of the most important:
- Client contract (between the bookkeeper and client detailing the type and level of services offered as well as contingency plans should something happen to the bookkeeper).
- Professional Indemnity Insurance (you need to have insurance in place should you make a serious mistake in your clients books – that might even cost the client their business – this is not just for your protection, this is also a courtesy to your clients – they will feel a lot safer knowing that if you mess up their accounts, they can sue you and get compensation – however daunting a proposition that may feel to you right now, don’t start up in business without it).
- Proof of client identity (Anti Money Laundering laws are global – in almost all jurisdictions, you will need to prove that you took cautionary measures in ensuring your clients are not criminals, and that means getting photo ID proof as well as domicile proof – a utility bill with their name and address on is usually good enough, or a personal bank statement or other legally provable document – again, always check your countries requirements on all these items).
There are plenty more documents you might want to use in your bookkeeping or accountancy business including employer’s liability insurance if you have staff or deal with members of the public face to face, but the above 3 are essential.
Without clients for your bookkeeping business, you don’t have a business. So let’s take a look at some proven ways of doing this most important of all marketing tasks.
The fastest way to get clients is to contact every accountancy practice in your area and let them know about your bookkeeping service.
If there’s one thing accountants are not keen on, it’s doing the every day tasks of tracking down receipts, tying them up with transactions, and entering those transactions into whatever bookkeeping system the client has chosen.
Accountants are far more fond of figuring out how best to save tax or make the business look great to investors. That’s what they’re trained to do, and that’s what earn them large fees.
So if you can take away some of the burden of bookkeeping, they will thank you for it.
The only downside is the fees you will be able to charge them. But, you don’t necessarily have to be the cheapest in town, provided you can show them these three attributes:
- You are qualified as a bookkeeper
- You work fast
- You are pin point accurate
The most important thing to an accountant is your accuracy. A badly prepared set of books will cost them in potential litigation (and you your job), so accuracy and detail is imperative.
If you can also prove you work fast – because you know what you’re doing, then you’re most definitely worth paying more for.
And finally, getting qualified is simply due diligence as far as the accountant is concerned. Even if you’ve been a bookkeeper for years and know what you’re doing, but have never bothered getting the certificates that prove it, definitely go after them now. Especially if you’re going to contact accountants as your first port of call.
The second easiest way to get clients is to do a flyer drop. This will take considerably longer. This is because at any one time, there will only ever be a handful of people in your neighborhood who need a bookkeeper – and when I say neighborhood, I mean 10,000 houses!
Look for houses that show the owners are not the poorest in town. So pick the more well off looking streets and if you’re going to deliver the flyers yourself, here’s what to look out for:
- Dogs behind letterboxes. They exist, and they hurt! Take a ruler with you so you can poke your flyers through the box.
- Make sure you print your flyers on the thickest paper you can afford – some of those letterboxes are VERY stiff to open and get any through – plus many have draft excluders to make it even tougher to get anything in!
- Never walk on the grass if there’s a path. This of course is the polite thing to do – but more importantly it shows you respect peoples property.
- Smile everywhere. Prospects WILL see you coming, and this is your first chance to shine even if you never say hello.
- Put a picture of yourself on the flyer. A friendly face always attracts more attention.
- Always talk to everyone you meet. Be interested in them. And only mention what you do if they ask.
- Do it in small bursts everyday. I found an hour a day over 3 months produces wonders.
The third way is actually the best of all, but it’s also the toughest, so few do it. It’s using the telephone (yep, we all hate it). But it works. Here’s what we do:
- Use Google to make a list of every business in your area for a particular industry you fancy helping.
- Write a simple short letter to let them know you can help them. Because you’re selecting just one industry, this makes writing the letter a little easier.
- Hand deliver the letters (or post them if you have the budget). If posting, use a normal postage stamp, and above all AVOID putting any type of advertising on the envelope – the purpose of the envelope is to get the letter opened – not put straight in the bin.
- Follow up with a phone call a couple of days later. This gives you a lever to use, so it’s not strictly a ‘cold call’. Start by saying “Hello, I sent you a letter a couple of days ago about my service, did you get it?” – they will be forced to give you an answer, and with any luck they will ask you what it was about. Write yourself a script and practice it beforehand to make this easier.
- The point of the phone call is to test is there’s any interest. If there’s any at all, ask them how they would like to proceed. This gives them the power, and they will respect you for it.
The fourth way is join your local business networking groups, but I can tell you from experience, this can take a very long time to work. People have to get to know, like and trust you before they will recommend you.
But once you get a client or two from a group, those recommendations will come thick and fast. My own bookkeeping business exploded this way, but it took a year for that to happen.
The fifth way is to offer yourself up as a speaker to local business groups. This is also a supreme way of getting your message spread. Remember that for talks like this you are NEVER selling your service, you are selling yourself as a person who knows what they’re doing and can be trusted.
The sixth (and perhaps most important method of all) is via your website. If you haven’t got one, get one. You can set one up yourself these days for free using WordPress.
But simply putting up the site won’t do anything at all. You need to promote it, and the best way to do that is through Google My Business by adding your site as a business, so Google can start displaying it to anyone searching for a specific business in a particular area.
Don’t be frightened of doing this yourself if you’re not a techie. It’s easy and Google give you complete guidance.
The last method I would recommend here for now is to use local advertising. You MUST have a good budget for this to work.
The ad does not need to be large, just the smallest display ad – or even a simple text ad will do.
But what matters most is continuity. Be prepared to advertise for 6 months. It will take that long for your ad to become familiar to the papers readers.
The more they see your ad, the more they trust you – even though they have no idea who you are.
Pick any one of the above and master it before moving to another. One (or many of them) will work for you. How do I know? Because all of them have worked for me (and when you think about it, there’s not many other ways left that businesses use to get more customers).
How To Sell Your Bookkeeping Service
You’ve attracted the clients, now how do you sell your service to them?
Every professional telesales consultant I’ve talked to says the same thing: “use a script”. But experience has shown me there is no way to write that script until you have had many conversations with your target audience.
This is why it matters hugely that you pick a specific industry to talk to and not go for ‘everyone’.
If your service can be used by everyone, great, but so can everyone else’s, and that means you won’t stand out.
So pick one specific industry and get to know it as well as you can – and the best way I know of doing that is to actually go and talk with people actively engaged in it.
People are always happy to help those looking for knowledge (and not trying to sell themselves!), so your questions will be welcomed.
And from that you will soon learn what matters most to them.
And from there, it becomes easier to start new conversations with prospects about their real needs.
For A4Accountants, we chose the hairdressing and beauty market to start with. I met someone who ran a beauty and hairdressing boutique at a local network meeting and arranged to have a coffee with her (which is normal practice in network meetings).
I was able to find out not only the problems of running such a business, but also how she dealt with the individual sub-contract/self-employed hairdressers that worked in her shop.
And from there, we were able to start figuring out a marketing plan.
We started by scraping the internet for local firms in that industry. There was a surprisingly large number of them. I knew that just one contact could yield 6 more who all worked in the same place (all would be sole-traders).
Then we sent letters to each contact we got. After a few hundred letters, we realised this was not going to work for this industry (we tried two different forms of letter – long and short).
So we went straight to telesales. This was always a part of the plan, but we’d looked upon telesales as the 2nd step.
It turned out that phoning cold was the absolute best thing to do. At first we had the excuse of the letter we had just sent: “Hello, I’m wondering if you got my letter about our new bookkeeping service? No?, OK, we offer a service that starts at just £xxx for someone in your profession. Would that be of interest?”
After a while, we changed the script slightly, so we didn’t need to mention the letter at all – because now we weren’t sending one.
We got a conversion rate of 10% from cold call to interested to hear more. And from that we converted around 20%.
So for every 100 people we contacted, we got 2 new clients. If we had just sent the letter, it would have been 1/10% (1 in a thousand) – with a massively higher cost overhead.
It could be argued that we didn’t test enough letter combinations out, and I’m sure with enough time and money we could have improved things, but we hit upon a better method quickly, and that’s what we wanted.
Cold calling costs nothing but time if you have a free call plan. And follow up letters to interested parties is then far more cost effective. We followed up the letters with another call (having already got permission to do this after the first call).
You can easily bring in a new client a week if you’re just on your own using this method. So in a year, you will have a very viable practice. And once you hit a certain number of clients, you will find referrals coming in faster, so you can start cutting down on cold calling (unless you want to expand of course).
The next step is meeting (or calling) your prospective client.
What’s The First Thing To Say To A Prospective Bookkeeping Client?
It’s all about trust. They must trust you 100% because if they become a client, they are going to need to reveal everything about their financial affairs to you.
Put yourself in their position. How much of your own affairs would you be willing to tell a stranger?
Now let’s put that into perspective. By the time it comes to a conversation like this, they will already know what you do – and what they want. So the ice is broken to some extent.
But, you will still need to probe deeply into their financial affairs – as well as their business affairs, so put yourself in that position, and think about what sort of questions you would be willing to ask if the roles were reversed.
Of course, you are very different from your clients (as is everyone – we’re all different really), so you need to think about how empathetic you are. How easy is it for you to see another person’s point of view?
When you’re watching a film, do you often side with the hero (or villain)? Or are you largely agnostic to the feelings generated by the script?
If you’re a very empathetic person, you will find aligning with people easy, and winning trust is simple for you.
If you’re not, then that’s fine too. You must just ensure you keep your own values to yourself or you run the risk of alienating your prospect before you have even found out what they want.
And finding out what they want is your top priority. This is VERY different from what they need.
You can weave in their needs to their wants once you know what it is they are after.
And that leads us to the most important point of all about selling.
It’s all about the future.
Everything that drives humans forward is about the future. Hope is what we have to keep up motivated.
Think about those two points carefully. Future and Hope.
We will also do things because of the consequences that would happen if we don’t – but either way, it’s about the future. Is it painful or pleasurable?
This is what wants are all about.
To discover someone’s wants, you need to start with asking where they are right now in life.
Do they hate bookkeeping. Do they hate submitting year ends accounts. Are they ignoring the things they must do, and if so, why?
Once you’ve defined their current position – using their own words – which means you must listen carefully to what they have to say, then you’re ready to help them reveal their future.
Speaking of which, we’ll get to that in the next episode, which you can find here: