Whatever your reason is to take the step to setting up your own bookkeeping business, the planning stage for any start-up is super important.
These tips are far from exhausting but hopefully they’ll trigger the right thought process and assist you with launching a successful practice.
1. Invest in the right software
Long gone are the days of shoe boxes filled with receipts. Your business won’t get off the ground if you can’t offer your clients an easy online solution to keeps track of monies coming into and out of their business. A good piece of software is essential to maintain accurate financial records.
When looking for the right solution, consider the extent of your bookkeeping business activities. Ask the software provider the right questions. Will it:
- monitor of the business workings in real time?
- create report analysis to enable better decision making for your clients?
- help you view the financial situation of your clients?
- create financial reports?
- save data in the cloud so that you can work from anywhere?
Ideally you want software to handle and automate as much of your business activities as possible. Not only does it save time but it also impacts on how much staff you may need to employ in the future.
2. Before you start a bookkeeping business
Make sure you spend sufficient time to conduct market research and create a solid business plan. It should cover topics such as:
Your customer profile - who are you targeting? Are they small businesses, sole traders or are you going after the bigger fish?
How you will let these clients know about your business - Consider all channels of distribution: digital such as social media and a website, word of mouth using friends and family, reach out to previous work and business associates, local advertising whether in the paper or dropping leaflets.
The range of services you will offer - Before making a list, go back to your target client and think about why you have selected that group. Also your skills come into play. Can you provide what these clients need?
On what basis you plan to provide your services - Some clients only look for once a year job, others prefer more of a regular monthly service. And then there is anything in between. You’ll need to consider your financial model and decide how you want to/can charge for your services.
How long you want to stay in business - You should aim to have at least a 3 year plan but 5 years is more helpful if you are planning your business to be your main activity going forward.
3. Professional qualifications
Your clients will need reassurances that you are qualified and have the relevant experience. Therefore make sure you have trade recognised education and flaunt it on your website together with recommendations from previous clients if possible.
Remember that suitable qualifications and experience is also an important element when getting insurance for your business.
4. Rules and regulations
As a bookkeeper running your own business, you will need to comply with some rules and regulations.
The first one is registering with the ICB. You’ll need to apply for a practice licence. You’ll have to comply with money laundering regulations and adhere to professional conduct regulations.
The money laundering regulations exist to help business owners to identify and also limit the risk for their clients laundering money.
The ICB sets out the basic principles for your bookkeeping business ethical and professional conduct as well as ongoing duties. In the event of a breach there is a disciplinary process that’s put in motion if a member breaches the regulations.
5. Insurance for bookkeepers
The ICB does have minimum requirements when it comes to bookkeepers' insurance. Every business has to have at least £50,000 of professional indemnity cover or have an insurance policy with a limit of 2.5 times their annual turnover whichever greater.
However, bear in mind this is just a guide. Once again go back to the profile of your target customer, consider the complexity of their industries and a possible impact if you make a professional error.
Remember the cost of legal defence can easily exceed the amount of any awarded or agreed compensation. Always factor that in when deciding on an insurance policy limit.
£50,000 limit could be easily spent on one claim defending against a litigious client. Ensure your policy limit is on ‘any one claim’ and not ‘in the aggregate’. The latter means that once your policy limit is exhausted, perhaps on a large claim, you are not insured against the next one.
6. Business formation
When you are setting up from scratch and you would like to start with a minimum spend, then kicking off up as a sole trader is the easiest option. All you need to do is to register as self-employed with HMRC and get a separate bank account.
However, there are downsides to being a sole trader. As a bookkeeper you know all about the VAT but also be aware that if you were to face a legal claim from an unhappy client, everything you possess might be on the line.
This is why setting up a limited company might be a wiser option. The cost of set up is minimal but, as a bookkeeper, you are probably aware there are ongoing costs associated with running an ltd as well as with closing it down.
Remember, depending on the work you do and your contractual obligations you may also need limited company professional indemnity insurance.
7. Business location
The cheapest start up option is remote working. This is also handy when you start hiring staff. No office costs and the entire country is your oyster.
A compromise is a membership at an ad hoc office space provider. Have a look at your local council website. Many are running initiatives to help small businesses by providing office space at a very low cost.
But some clients like face to face time with their bookkeepers and you will need to decide whether your target audience is likely to require more of a personal approach. In that case you may need to hire a permanent office and factor the ongoing costs in your business plan.