In this in depth article we look at all the basics you need to be aware of to set up your home based bookkeeping practice.
Setting Up Your Bookkeeping Business From Home
Anyone can start a bookkeeping business from home. Amazingly, you don’t even need to be qualified, though it does help!
To give you an idea of what it involves once you are up and running, the average number of clients per bookkeeper is around 30. This makes it fairly easy to figure out how much you will need to charge for your services. In very simple terms, decide how much you want or need to make a year, then divide it by 30. You now have your cost per client.
The next important point to consider is the size of business you want to target. The larger the business the more work there will be. Larger businesses will want more analysis, and although that analysis may not be done by you, the bookkeeping will become far more involved and therefore time consuming. Accounting for items when they are actually consumed, rather than when they are paid for, means extra accounts and more transactions (insurance spread over 12 months but paid for in a single sum for the year is just one example).
So, if you are just starting out, target micro businesses. That is, those with a staff count of less than 5 including the owner(s). The turnover is not that important, it is the number of transactions and the nature of those transactions that matter.
You are not competing with accountants here. That is probably one of the main things to understand. Accountants are your friends. They can actually give you loads of work if you are struggling to find your own clients. Accountants do not like bookkeeping! Their work is in interpreting the books, advising about tax, and preparing statutory accounts for the Inland Revenue.
Another important thing to remember is to keep your overheads to the minimum. Setting up your bookkeeping business from home is the best and simplest answer to this. It also means you can claim expenses from your household costs. If you have 6 rooms in your house and you use one of them as your office, you can claim back 1/6th of many of your utility bills (eg. electricity and gas).
You could also claim back 1/6th of the interest on your mortgage if you have one, though be careful of capital gains tax if you should subsequently sell your house. Take advice from your own accountant in this case (if you take on freelance work from an accountant, you will find they will be more than willing to help you out with advice in this area).
In part 2 of this article, we will give you a step by step guide on how to start your own bookkeeping business.
You can choose to be self-employed or set up a company. This is a simple decision. Self-employment is the way. The reason is that you will not have to pay tax until much later. That is really important when you are starting a new business. Cash is king as they say. Whilst you build up your client list, you need to conserve as much money as possible. If you were to form a company, any money you pay yourself in remuneration you will need to pay tax on there and then.
Another consideration is why you would want a limited company. If you were a retailer or someone supplying and selling other people’s goods, then a limited company is probably vital. You will be buying these goods on credit, hoping to sell them to make a profit. If, for some reason, the goods do not sell (maybe a competitor our prices you or a better product comes along) you may have to sell them at a loss. You could end up losing not just money, but your house! If you are self-employed, that is exactly the situation you do not want. Whereas selling a service such as bookkeeping, involves mostly your time.
The next thing you need to consider is your trading name. You have two choices here:
1. Use your real name
2. Make up a name
Both have pros and cons. Using your real name will invoke trust. You are displaying a degree of confidence in that you are happy to be exactly who you are. On the other hand, creating a trading name will let you advertise what you do. For example, ‘ABC Bookkeeping Services’. However, the best way is to combine both concepts. If your name was June Smith, then name your business June Smith Bookkeeping Services. Perfect. You are saying who you are and what you do in one go.
Do you need a logo. The simple answer is NO. Don’t waste your money. Your logo will be meaningless to most people unless you have a huge marketing budget, and even then you would be wiser to spend that budget on selling your services not your brand. Yes, so many marketing gurus talk about brand being everything, but it is a waste of time, effort and money for something as simple as a bookkeeping service.
So, your name IS your logo. Choose a classic font everytime you use it and people will remember you. Do not use any fancy fonts. It must be legible and clear. That is all you need to know about logos.
Now, what for most people, is the hardest part of all. Getting customers! It is the same problem for everyone. Where are your customers? Well I can tell you exactly where they are: everywhere! The fastest route is to contact all your local accountants. More and more businesses are starting. There is almost an exponential growth going on. In these recessionary times, people (like yourself remember) are thinking about an alternative to the 9-5 job. And what is the first thing they need to do? Ask questions, get advice and maybe get some training. Part of the group of people supplying those services are, you guessed it, accountants.
Open a spreadsheet (or a notebook) and start with the Yellow pages. Enter the contact details of all your local accountants. You could also include bookkeepers. They may be in competition with you, but if they are overstretched, it may just help you get started. You may have to accept slightly less money, but it will get you on the road to success.
First off, write an introductory letter. I have found in business one of the most powerful words is ‘introduce’. Your first sentence should say something like: ‘I would like to introduce myself to you. I am June Smith, and offer a local bookkeeping service to accountants’. For this marketing letter, the accountants are your target market, not their clients. You do not need to say too much, certainly do not mention pricing, but say you would be happy to arrange a visit to talk about the posisbility of working with them. End with a call to action, such as ‘I will telephone your office in a few days to arrange an appointment if that is OK with you’.
Now, there is one more vital thing. Experience. Do you have any. If you have years of experience, say so, eg. ‘I have 20 years bookkeeping experience to TB’ – feel free to use abbreviations like TB for Trial Balance, you are speaking your target markets’ langauge.
What if you have no experience. No problem, you will have taken some bookkeeping course and have a qualification right? (if not, do it, you will find it much harder otherwise). So now the line is ‘I am a fully qualified bookkeeper to level 3 and a registered member of <insert some bookkeeping association here>’. That should do the trick. If you have experience and qualifications shout about both of them. Anything that can add trust will win you clients – and it makes no difference even if you are running a bookkeeping business from home.
Send your letter. After a day or two (do not leave it too long) if you have heard nothing back, telephone your list. Persistence is everything. When you phone, ask them about their business. Don’t talk about your own unless they ask. Make them feel you care. Ask them what problems they have with bookkeeping. If they give you any indication of a problem, jump on it and say you can help them.
Follow these steps methodically and you will start to build your client list.
In part 3 we will talk about going direct to clients. Far more lucrative, but requires more effort, as you would expect of any business.
By far the hardest way to get clients is to try to attract them directly. Having said that, it is really easy to find them! the hard part is getting them to give you business. and if you really want to set up a bookkeeping business from home and make it work, then you are going to get this aspect nailed!
Your first problem is convincing them that you are trustworthy. After all, you are going to be dealing directly with the finances of their business. Ask yourself this: would you trust someone you had never met before with looking after your money? No? well there you have it!
So, how do you overcome this. The simplest answer is in how long you have been established. If your sign says ‘Established 1980’ great. You must be bona-fide, the problem is, you haven’t even started yet! (that’s why you are reading this, right?). So, what to do.
Basic Marketing Checklist
1. A real postal address. Do not use box numbers.
2. A landline. Always have a landline.
3. Always use your real name for the business (see part 1)
4. Qualifications and member of bona-fide bookkeepers association
5. Professional stationery. Business card, letterhead and compliments slip
6. Always dress professionally
A real postal address lets your potential clients know you are permanent. A landline really adds credibility to this. So many service businesses start up using a mobile number. But for a business thinking about outsourcing its bookkeeping, a mobile is just too, well… mobile! Don’t use free or premium numbers either. You are aiming at a local market, so give them a local landline. Business owners want to know where you live. They want to be sure any paperwork they give to you is safe. Freephone numbers are terrific for established businesses, but for new businesses they are a hindrance. It suggests you are not local. And not local implies you are not really interested in local business.
Your business name is vital for establishing credibility. Would you use a firm called ‘ACME Bookkeeping’ or ‘James Smith Bookkeeping’. See part 1 for more on that.
Qualifications are also absolutely vital. It’s the same thing again. Put yourself in the shoes of your clients. If you mess up their VAT, it is they who suffer the consequences, not you. So would you entrust your bookkeeping to an unqualified person?
Become a member of an established bookkeepers association. Make sure they have a code of conduct. Advertise that fact on your stationery, website and advertising. Advertise it on any sales letters or handouts you produce. Use the associations logo and any other marketing material they can provide.
Make sure your stationery is designed by a professional designer. Do not make it fancy. You must be seen as a safe pair of hands. Do not design it yourself to save money (unless you happen to also be a designer of course). Your image must be professional and simple. Do not use tag lines. Eg. ‘Bookkeeping to die for’! Let your business name and stationery design speak for itself.
If you get an appointment to visit a client, always dress smartly. You are a professional. They are trusting you with a very sensitive part of their business. You will probably be the first to know if they have problems or are making a success of their business. Your confidentiality is vital to them. Show them you are professional by dressing appropriately.
In part 4 we will talk about getting new clients. If you haven’t signed up to our 12 week certified bookkeeping course yet, click here.
By now you should have a good idea of how much to charge, how many clients you need in order to be completely independent, how partners can help you, and why your image, from your business name down to what you wear is absolutely vital. So, let’s put it all into practice and go win some clients and make your bookkeeping business from home really fly!
But first a note of encouragement. Once you get a few clients on board, you will find that they start recommending you to other business people they meet. So although you need to get on the first rung, after that it should be plain sailing providing you follow the advice in these guides.
Here’s a great question: How many cars do you see driving around in your local area with a sign on the side or back that says ‘Local Bookkeeping Service…’? None right? So go to a sign maker and get some magnetic car stickers made. That way you can remove them whenever you need to (eg. if you sell the vehicle).
The message on the sign must be absolutely clear and simple. Since you will be displaying the sign in your local area you can use your business name ‘Jill Smith Bookkeeping Service’. It is absolutely vital you put your landline number on there too. The STD code also tells people you are local. You will also need a simple selling slogan. Eg. ‘Best Rates in Town’. It sounds corny, but if someone is looking for your service, they need reassurance they are making the right decision, and ‘best rates’ works. So you will end up with a 3 line ad:
- Line 1: Who you are
- Line 2: Why they should use you
- Line 3: Call to action
The text must be legible at a distance. Do not use fancy fonts. Simple is best and works. Make sure your landline forwards calls to your mobile when you are out (or your partner is aware they will get calls if they are in).
Advertise in your local newspaper. There is usually a section for local services. You may see competitors in there, so all you need to do is study their ads and look for their weakness. If they offer ‘Established 1899’, make yours ‘Modern Fast and Friendly Service’. Or you could counter it with ‘Fully Accredited’ if they do not mention that. Look for what they have missed off and highlight it in your ad. You will find that these people only advertise occasionally (as you will also do in time yourself) because most clients come from recommendations.
After you advertise, contact that paper’s editorial staff and offer to write a piece on small business and how to succeed. Make it relevant to the readership. Do not ask for money, offer it free. It should be helpful to small businesses, not about bookkeeping. You are gaining trust with pieces like this and gaining credibility as an expert. If you can get a regular spot, in 6 months, you will not be able to stop the stampede.
Produce a hand out. Drop them in letterboxes. Ask if your local library would accept them in their local services section. They will display them if there is value in the leaflet. Eg. ‘How to do your bookkeeping’. Contact your local chamber of commerce. They may want you to join, but you do not have to. They are there to promote local businesses and you offer a service that will help local businesses. Explain that and they may help. Contact all local networking groups and attend their breakfast meetings. If you get the chance of a 5 minute speaking slot, grab it. All you need to say is that you are a local bookkeeping service, fully accredited and qualified and charge the best rates, come and see me afterwards. Once you have done that a few times, you will find it easy. It will also help with your confidence when meeting other business people in any context.
There are many more ways to promote yourself and your business, but follow the above as a starter and you should have no problem getting your business started and growing it rapidly.
In part 5 of this course we will look at how to keep your clients and meeting deadlines.
Part 5 – Final Part of your Bookkeeping Business From Home mini course
Getting clients is not too hard as you have already seen. Keeping them is actually very easy too. But you will lose them rapidly if you are not punctual. If they ask you for their VAT return and you do not return the call quickly, they will start to lose faith in your service, and then in you. So it is vital you set out your terms and conditions at the start and stick to them. Your clients will respect you even more if you have a set of terms and conditions. It is the professional thing to do. If you belong to a bookkeeping association, they will not only be able to provide you with guidelines, they will also have a strict code of conduct. Use that to your advantage. State it clearly on your marketing materials.
Things to include are:
- How quickly you will respond to queries (eg. all enquiries will be answered within 2 business days)
- When and how often you expect to receive paperwork
- When and how often you will deliver reports
- The scope of work (eg. bookkeeping, VAT returns [Europe], Sales Tax [USA], debt collecting)
- When you expect to be paid (eg. all accounts must be settled in full within 30 days of invoice date)
- Surcharges for overdue invoices
- A disclaimer stating that your figures can only be as good as the documents provided to you (you are not responsible for other people’s errors, although you will always point them out if you spot them)
- Your business name and address and contact details
This list is not exclusive and you should contact a solicitor to make sure it is water tight and you have not missed anything out. Remember UK law is ‘case law’. That means each case has a possibility of changing the way law is interpreted. If you should ever be taken to a small claims (or larger) court, the judge will always look at things from a ‘fair’ point of view. For example, if your terms and conditions state that you are in no way responsible for anything, the judge will not view your case kindly!
Some countries impose regulations on money laundering (following the terrorist scares of the last decade). In the UK for example it is necessary to register with HMRC if you offer bookkeeping or accounting services to other people. There is a charge involved for this, so please check with your Inland Revenue service. Some bookkeeping associations cover this cost as part of their membership (which can often be cheaper than registering independently).
To ensure you keep everything up to date and you do not miss deadlines, open a spreadsheet and record your client details together with when you expect to receive and deliver paperwork, tax returns etc. Do one for each year. You could open new worksheets in the same spreadsheet, which will give you quick access to previous years.
Make sure you get all your client details including main contact, address, telephone numbers, who is responsible for delivering paperwork to you, who is responsible for paying you.
Add a date for each client to contact them on a regular basis so both you and they can discuss any issues that have come to light. Always do this. That call can really help your relationship. Your clients will know you care about their business. Of course, if your client runs the entire business on their own, then this wont be necessary as you will be in regular contact anyway.
OK. That completes this mini guide to setting up a bookkeeping business from home.
We have published a series of marketing articles to really get your business noticed online. It is much easier than you think, so whatever you do, do not spend a fortune on internet marketing or even starting a web site until you have read these articles. I can pretty much guarantee that if you follow them your site will get to page 1 of Google for a very relevant keyword in your target area, and the cost of doing that will be minimal. You can find everything you need on QuentinPain.com
Join Our Online Certified Bookkeeping Course
If you would like to join our 12 week certified bookkeeping course CLICK HERE.
And finally a little video on profit, gross profit, net profit and EBITDA: