How to Start a Bookkeeping Business in 8 Steps

A bookkeeping business consists of tracking income and expenses, processing payroll, and possibly preparing tax returns for business clients. Bookkeeping is a great home-based business that’s easy to start with very little cash. Whether you’re looking to make a little extra money or wanting to grow a business to support you and your family, our eight steps will help get you there.

The following are the eight steps to start your own bookkeeping business.

1. Earn Your Certifications

One of the fastest ways to gain credibility with potential clients is to prove that you have the knowledge necessary to do bookkeeping, payroll, and perhaps tax returns. If you’re a certified public accountant (CPA), you probably won’t benefit from becoming a certified bookkeeper, but you still might consider becoming certified in whatever accounting software you choose to use.

Certified Bookkeeper

Even if you don’t have formal education in accounting or bookkeeping, you can become a certified bookkeeper before starting your own bookkeeping business. Unlike CPAs, these certifications are not regulated by the state, so be sure to choose a large, reputable organization so that the certification is meaningful and respected.

There are two top professional bookkeeper organizations that we recommend you certify with:

American Institute of Professional Bookkeepers (AIPB): To become AIPB-certified, you must meet the 3,000-hour work experience requirement and pass a certification exam successfully. Once certified, you will earn the right to put the letters CB―for Certified Bookkeeper―behind your name and display this on your resume and business cards, which will give you an edge with potential clients. This certification is ideal if you do not have any formal education in the bookkeeping and accounting field.
National Association of Certified Public Bookkeepers (NACPB): To earn certification through the NACPB, you must take courses in bookkeeping, payroll, QuickBooks Online, and accounting principles and pass an exam for each course. You’ll also need one year of experience before applying for the license. If you’ve had college accounting courses, you might be able to substitute them for required courses, but you’ll still need to pass each exam. Once you are certified, you will earn the credentials CPB―for Certified Professional Bookkeeper. You can put these letters behind your name on resumes, business cards, and other materials to display your accomplishment to future clients.

Look at our How to Become a Certified Bookkeeper guide for the details of these, plus other, bookkeeping certification programs.

Accounting Software Certification

Some of the best small business accounting software providers offer a certification program so that bookkeepers can demonstrate they are proficient with the software. Most of the certifications are free and even come with free accounting software for your firm. Here are a few of the most popular accounting software and their certification programs:

QuickBooks ProAdvisor: QuickBooks is by far the most popular small business accounting software in the United States, and you will very likely have clients using it. QuickBooks offers ProAdvisor certifications for both QuickBooks Online and QuickBooks Desktop. The Online certification is free, but the Desktop certification requires the purchase of QuickBooks Desktop Accountant software, which is $449 per year. You earn your certification by completing self-paced lessons and taking exams.
FreshBooks Partner Program: FreshBooks is popular accounting software for service-based businesses requiring exceptional invoicing features. FreshBooks offers a partnership program with accountants that includes FreshBooks certification and skills training.
Xero Partner Program: Xero, while not as popular as QuickBooks, is a comparable program at a lower cost. Similar to FreshBooks, Xero offers a partnership program that includes Xero certification.

Tax Certification

No certification is required for a paid preparer to sign a client’s tax return, but I highly recommend not preparing returns unless you are a tax professional or willing to put in the work to become one. Many bookkeeping firms prepare financial statements that their clients take to CPAs or other tax pros to prepare a return. You may find yourself working closely with their tax preparer and, together, you can provide outstanding service to your mutual clients.

Avoid pitfalls: It is illegal to prepare a client’s tax return and not sign it as the paid preparer. This means you cannot use a do-it-yourself (DIY) software like TurboTax or TaxAct to prepare client returns because they don’t allow for a paid-preparer signature. You need professional tax software instead.

If you’re not a CPA and you want to prepare tax returns, I recommend becoming an Enrolled Agent (EA) through the IRS. Enrolled Agents must initially pass an examination and then complete annual continuing education to renew their certification every three years. While no formal education or classes are required, the examinations are difficult and will prove you have the knowledge to serve tax clients properly.

2. Create a Business Plan

Writing a business plan is something that everyone should do before they start their own business. While a business plan can be used to obtain funding for your business, the real value is the thought that goes into the process of writing a plan.

During the business plan writing process, you should think about every aspect of your business, such as what products and services you will sell, how you will market those products and services, and who your competition is. You will also create a financial plan that should include a 12-month profit and loss projection, projected cash flow, and a projected balance sheet.

Here are the key items that should be included in every business plan:

Cover page
Executive summary
Company overview
Competitive analysis
Marketing plan
Startup costs
Financial projections

Check out our comprehensive guide to creating a business plan.

3. Register and Organize Your Bookkeeping Business

There are several important decisions that must be made before you can start servicing customers. This step is important because it establishes your business as legitimate and may help to limit your personal liability if your company is ever sued. Whether you are doing this part-time or full-time, you don’t want to skip this step.

The following is a checklist of what you need to do to establish your business at the local, state, and federal levels.

Select a Business Name

Naming your business can be both a fun and stressful exercise. Your name must convey your brand since that is what a potential customer will see before they sit down with you for that initial consultation. Make sure your business name says exactly what you do. This is not the time to be cute unless you can also be clear about what it is that you do.

Here are some great tips on how to name your business:

Aim for clarity: Your name needs to tell people what you do. If you’re focusing your bookkeeping business on a niche, include the niche in your name.
Use a term with an established brand: For example, you could use the name of the city where you are located, such as Scranton Bookkeeping.
Get input from others: Ask family and friends for their input. Make it fun and put it out on your social media that you are looking for suggestions on what to name your business. Offer a prize to the winner.
Test it out: Try it out on potential customers to see what they think. Compare your name to competitor’s names to see if it stands out enough, but not too much.

For more tips, check out our Business Name Generator to help get those creative juices flowing.

Select a Business Structure

There are four common business structures: sole proprietorship, partnership, limited liability company (LLC), and corporation. The structure that you choose will determine your personal liability if the company is ever sued, your tax liability, and your ability to raise capital.

To assist you with this decision, I recommend that you get an introduction to the four common business structures by reading our Best Small Business Structure guide.

Most people operating a part-time bookkeeping business with no employees will operate as a sole proprietorship, which generally works fine. However, if your business grows to the point of hiring employees, you need to consider becoming an LLC or corporation. In addition to tax consequences, your personal liability in the event of a lawsuit can vary dramatically by business structure, so be sure to consult with an attorney.

4. Set Up Business Operations for Your Bookkeeping Business

Now that you’ve organized your business, you can start setting up operations like getting the right insurance and opening a separate business checking account. It’s important to separate your business operations from your personal finances to make your accounting easier and potentially affect your liability in the event of a lawsuit.

Hire an Answering Service

As a one-person operation, you may find it hard to get back to clients right away, especially during tax season. Sending prospective customers to voicemail when they need your services can cost you business. Go Answer is a bilingual answering service that connects your customers to live customer service agents via phone, text, web chat, or email 24/7. You can get started today with a 30-day free trial.

Set Up a Business Bank Account

It’s important to separate your business finances from your personal finances. While most people think they should wait until the business starts to generate cash flow, it’s important to track expenses immediately so that they can be deducted as startup costs. It’s easy to establish a business checking account.

Establish a Business Mailing Address

If you plan to lease office space, then your mailing address will be wherever your office is located. However, if you plan to set up a home office, you will need to obtain a business mailing address so that you don’t have to use your home address. This will make your business appear more professional as well as maintain your privacy.

There are a couple of options. First, you can rent a post office box from your local post office. On average, you will pay $60 for six months or $120 for the year. Of course, the price will vary based on your location.

Another option is to rent a UPS mailbox instead. The UPS Store will give you a real street address to use. A benefit to using a UPS mailbox is some merchants won’t deliver to P.O. boxes and require a street address.

Get Bookkeeper Insurance

As a bookkeeper, you should have liability protection in case you get sued for a mistake on your client’s books. Insurance can both cover the cost of settling a lawsuit as well as the lawyer fees to defend against a lawsuit.

For more information on the right insurance coverage, check out our article on Bookkeeper, Accountant, and CPA Insurance.

5. Get the Right Accounting Software

Determining which software to use to manage all of the various aspects of your business can be an overwhelming task. To get you started, the following is a list of the areas of your business for which you will need to decide which software tool to use.

Bookkeeping/Accounting Software

Since you are starting a bookkeeping business, I’m sure that you have already given some thought―or made a decision―about which accounting software to use for your business. As you know, there are hundreds of options from which to choose. However, my recommendation is that you use QuickBooks Online, which we rated as the best overall small business accounting software. As discussed earlier, you can receive QuickBooks Online Accountant for free when you join the QuickBooks Online ProAdvisor program.

Payroll Software or Provider

Depending on the bookkeeping/accounting software you choose, there will generally be a payroll processing option you can turn on when you are ready to hire employees. If you decide to go with QuickBooks, it offers a variety of payroll options from which to choose. If you decide that you don’t want the headache of dealing with payroll, check out our guide on Six Payroll Competitors Payroll Competitors that beat ADP when it comes to price.

Practice Management Software

Another tool that will make your life easier is practice management software. This software can help you organize and track the progress of client work and, in some cases, provide a portal to access your client’s books. QuickBooks and Xero both offer practice management software that is integrated with their accountant software.

Be sure to check out our top best accounting practice management software guide for more information.

Electronic File Sharing/Management

A document sharing program will allow you to share information, such as bank statements, copies of receipts, invoices, and accounting files, with your clients no matter where you are working.

Dropbox is a popular document sharing program. You can create a dropbox for each client, and they can start submitting their information. This system is much more secure than sending files via email or using a USB. To access the information, you need a user ID and password. All files are stored in the cloud, so there is no backup required.

6. Fund Your Bookkeeping Business

After completing your business plan, you will have a good idea of what your estimated startup costs will be. In general, the startup costs for a bookkeeping business can be low if you work out of a home office as opposed to leasing office space, which we will discuss in the next section. The experts say that you should always have at least six months’ worth of expenses in the bank.

If your business is brand new and you haven’t generated any revenue yet, check out our guide to startup business financing for more details.

Apply for a Business Credit Card

You’ll want to open a business credit card account soon. A business credit card will likely be the first form of financing you’ll qualify for, and it can be a great financial tool to help you with cash flow or necessary expenses early on in your business. A business credit card can also be a great way to track your business expenses easily. This will go a long way toward making tax time a breeze.

Startup bookkeeping businesses will typically use a startup credit card to float working capital expenses, earn rewards, and manage employees. In our Best Credit Cards for Startup Businesses, we have selected the top five credit cards for startup businesses.

7. Set Up a Home Office for Your Bookkeeping Business

When you’re first starting out, you should keep your costs low by setting up a home office. If possible, plan to meet your clients at their office or virtually. I do not recommend that you invite clients to your home office unless you know them very well and you have a private room where you can work. Check out our tips to consider when creating your home office to learn more of the do’s and don’ts when setting up a home office.

Also, don’t forget to take those home office tax deductions. You can deduct repairs and maintenance to the area used for business and a portion of utilities, real estate taxes. and insurance on your home.

If you can’t make a home office work, look into virtual office space or office sharing. Typically, this includes a mailing address, local telephone number, receptionist to answer calls, physical office space, and access to a conference room that you can rent by the hour.

Another important part of setting up your home office is establishing a professional business number that has a professional voicemail message. I recommend getting a virtual phone number that can be routed to your existing cellphone. The virtual phone number can have its own professional voicemail message and will allow you to keep your personal number private.

8. Market Your Bookkeeping Business

Marketing is one of the most difficult things for accountants and bookkeepers to master. Whether this is your side gig or full-time business, you can get a website customized for your business with a company that offers specialized marketing services, like CPA Site Solutions. It will have one of their webmasters reach out to you for a quick 15-minute conversation before it goes on to create your website fitted with your logo, images, and content.

CPA Site Solutions will focus on designing a website that increases revenue, improves client loyalty, and drives brand awareness. It even offers a free 60-day trial so that you can see if it works for your business.

In addition to a website, there are many ways to market your bookkeeping business:

Become a business advisor with the Small Business Development Center (SBDC).
Be an adjunct instructor.
Get certified in accounting software.
Sign up with bookkeeper freelancer websites.
Join a local Meetup group of bookkeepers and accountants.
Establish a client referral program.
Establish professional social media accounts.
Target a niche industry and join their industry association.

Read our guide on How to Get Bookkeeping Clients to learn how to implement these marketing ideas, plus learn more ways that you can market your bookkeeping business.

Bonus Tip: Stay on Top of Industry Trends for Bookkeepers

It’s tough to stay on top of new trends and changes in the industry. For example, one of the most popular trends in the software industry is that installed desktop software is becoming a thing of the past and is being replaced with subscription-based cloud software, also known as software-as-a-service (SaaS). This is a trend that is completely changing how bookkeepers and accountants do business, so it’s important that you understand how it works since it will have a direct impact on your business.

Here are a few steps that you can take to “stay in the loop” on what’s going on in the bookkeeping/accounting industry.

Attend Accounting/Bookkeeping Conferences

Investing the time to attend a conference will not only give you those continuing education credits you need to keep your bookkeeper or CPA certification but will also give you the means to learn what the hottest trends are in the industry and what’s becoming obsolete. A great conference to attend is QuickBooks Connect, which is hosted by Intuit and usually held in San Jose, California, in the fall.

Sign Up for Blogs and Newsletters

You may be surprised by how much valuable information you can get from monthly blogs and newsletters. You may not want to sign up for every accounting/bookkeeping blog that you come across, but here are a few worth checking out:

Join a Professional Bookkeeper Association

You should be a member of at least one professional bookkeeper association. The American Institute of Professional Bookkeepers and the National Association of Certified Public Bookkeepers are the top two associations for bookkeepers.

The AIPB offers membership for one, two or three years. The membership fee starts at $39 for one year and includes a subscription to a monthly newsletter, free accounting, payroll, and QuickBooks help on a member answer line and other benefits.

The NACPB offers a membership for $200 per year and includes access to practice certification exams, continuing professional education, training videos, discounts on certification exams, exam prep courses, and other benefits.

Bottom Line

Now that we’ve provided you with a roadmap to get your bookkeeping business started, I want to challenge you to pick a date for when you would like to be ready to take that first client! Then, take this guide and create a weekly to-do list based on the steps we have shared with you.