Starting a Bookkeeping Business
The major services an accountant offers includes working with individuals on tax issues, financial management for personal and businesses, and processing services such as bookkeeping and payroll.
Typical tasks in this type of business include computing, classifying, and recording numerical data to keep financial records complete.
This type of service provider also perform any combination of routine calculating, posting, and verifying duties to obtain primary financial data for use in maintaining accounting records.
They may also check the accuracy of figures, calculations, and postings pertaining to business transactions recorded by other people.
Anyone with a rudimentary knowledge of basic bookkeeping and access to accounting software for small business (MYOB, Quicken etc) can set themselves up as bookkeeper.
Accountants on the other hand usually have tertiary qualifications and professional status with a relevant professional body (i.e., CPA). In Australia, to work as a sole tax and compliance practitioner you must be a registered tax agent with the ATO. To become registered you must be qualified and have relevant tax experience.
Before you hang out your shingle as a tax accountant, check out the ‘legal’ requirements in your jurisdiction.
To set up as an Accountant or Bookkeeper you will need somewhere to actually do the work. If you plan to travel to your clients, you can make do with a home office.
You will need a computer and printer with relevant software. The ability to send and receive information electronically via a fax or email is also a good idea.
Add Business cards, letterhead, envelopes and other basic office supplies to your shopping list.
Startup costs can vary depending on how you set up your business (at home or in an office), and what type of services you are going to offer (clients come to you or you go to them), and can range anywhere from $3,000 – $6,000.
Apart from your equipment costs, you should invest in insurance.
Public Liability Insurance if clients are going to visit your office, Professional Indemnity Insurance no matter what. Business Continuity Insurance, Income Insurance, Equipment Insurance etc. etc.
Setting up an office, whether in your home or in rented premises can be another significant startup cost. You will need office furniture, a telephone system, and signage.
Don’t forget that you will also need to set aside enough working capital for at least three months worth of expenses!
Basically a bookkeeping business is limited by the number of chargeable hours and your hourly rate. If you are working alone, (and not working seven days a week!) you will have about 260 working days a year.
As a new business owner, you would have to spend at least one day a week working on the business, catching up with the client paperwork, marketing your services, preparing for client consultations, and doing your own business accounts. This takes your number of days down by at least 52 to 208.
If you intend to have a break once in a while, those days need to be deducted s well. Four weeks is equivalent to 20 days. Oops, down to 188 days.
How many hours a day are you planning on working? Don’t forget to deduct traveling time if you are planning on offering a pick-up and drop-off service for your clients. Even if you are working out of an office and not doing any traveling, don’t expect to work a full 7.5 or 8 hour day. In the early phases of developing your business you may not have the work, and when you do, no-one is 100% productive! At most plan on 6 hours a day.
That’s 1128 chargeable hours per year, and that is assuming that you have enough clients to keep you working at full capacity!
Hourly rates? Depending on your qualifications and experience you could charge anywhere between $35 – $150 per hour. Let’s assume $35. That comes to $39,480.
Now deduct your expenses. Office space, insurance, telephone, office supplies, computer/printer lease, vehicle costs, software support costs, subscriptions and memberships, marketing etc.
To charge more than this, you will probably need to be qualified and offering a more sophisticated service than say basic bookkeeping or payroll processing.