How to Start a Bookkeeping Business [+ Free Checklist]

• Cover page: The cover page of your business plan is your first impression, so it should be professional and informative. If you have a company logo, include it at the top to enhance brand recognition. The document title should include “Business Plan,” and a concise and catchy tagline can introduce your business proposition. It’s also important to include your contact information and a completion date to show that your information is current.
• Executive summary: This is a concise overview of your entire business plan, highlighting the company’s purpose, products or services, target market, and financial projections. It’s essentially an elevator pitch in written form, so it is important to be clear and compelling to attract the reader’s attention.
• Company overview: Dive deeper into the details of your business by explaining what you do, your mission statement, and what makes your company unique.
• Competitive analysis: Demonstrate your understanding of the competitive landscape. This section should identify your target market, its size and demographics, and any trends that might affect your business. Also, take an impartial look at your competitors to determine what sets your business apart from them.
• Marketing plan: Outline how you plan to reach your target market and convert them into customers. This includes your marketing channels, pricing strategy, and sales strategy.
• Financial projections: This section lays out the financial health of your business. It should include your startup costs, projected revenue, expenses, profits, and losses over a specific period. You may also need to include funding requests if you’re seeking an investment.
• Management team: Briefly introduce the key members of your management team. Highlight their experience, skills, and qualifications that demonstrate their ability to lead the business to success.

First, decide whether your target market will be limited to your surrounding area or if you’ll offer online services. While it’s tempting to offer your services online to a worldwide audience, it adds a lot of complexity to your operations. You should plan on paying for help with online advertising, web design, search engine optimization (SEO), and website content management.

The next decision is whether to focus on a particular small business niche or to offer services to all small businesses. It’s much easier to become an expert in accounting for a particular business niche than for all businesses in general.

The best niches to consider are those with unique bookkeeping challenges. For example:

• Construction companies compute their profit by project
• Truck drivers have special tax rules for computing travel expenses
• Restaurants have a very high volume of relatively low-value inventory items to track

While choosing a niche will greatly reduce your available client base, it makes it much easier to gain expertise and distinguish yourself from your competitors.

You should decide what services your bookkeeping business will initially offer. You might add more later, but knowing your initial offerings is important so that you can choose the right certifications and software.

Here are some of the common services offered by bookkeeping businesses:

• Basic bookkeeping: Basic bookkeeping usually includes entering banking transactions, classifying payments, and reconciling bank statements. The result is typically a basic set of financial statements at the end of each month.
• Invoicing: Some bookkeeping businesses will prepare and mail invoices to their clients’ customers. Even if you don’t prepare and mail the invoices, you can collect, deposit, and track customer payments.
• Bill payment: You can provide value to your clients by tracking their unpaid bills. You can submit payments to their vendors or simply provide a list of bills that need to be paid.
• Payroll: If your bookkeeping business provides payroll services, you’ll need to not only issue payments to your clients’ employees but also track and pay payroll taxes. Be sure to pick a client software package that can easily be expanded to include payroll.
• Tax returns: Only provide tax return preparation to your clients if you have tax expertise. It’s not difficult to learn how to fill out tax forms, but there’s much more to know to adequately advise your clients. If you do decide to prepare tax returns, be sure to get professional liability insurance.

Define your service packages and pricing structure so that you can easily communicate this information to your clients. Create tiered service packages with increasing levels of complexity and features.

Here are some common options:

• Basic package: Ideal for startups or freelancers with minimal transactions. This could include bank reconciliation, categorization, and basic reports.
• Standard package: Suitable for growing businesses with moderate transaction volume. This might include everything in the basic package, plus accounts payable/receivable management and payroll processing (if applicable).
• Advanced package: Caters to established businesses with complex bookkeeping needs. This could include everything in the standard package plus tax preparation assistance, financial analysis, and bookkeeping cleanup for neglected accounts.

There are several pricing strategies. These include

• Hourly rate: This is achieved by charging an hourly rate for your time. This is simple but requires good time management to stay profitable.
• Monthly retainer: Clients pay a fixed monthly fee for a predetermined set of services. This provides predictable income for you and budgeting ease for clients.
• Per-transaction fee: Charge a set fee per transaction processed, which can be efficient for high-volume clients but may not be suitable for all businesses.

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 aren’t regulated by the state, so be sure to choose a large, reputable organization so that the certification is meaningful and respected.

There are two professional bookkeeper organizations that we recommend you certify with. There are also other opportunities to earn a bookkeeper specialization, such as through a university like UCLA.

Some of the best small business accounting software offer a certification program so that bookkeepers can demonstrate they’re proficient with the solution. 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:

No certification is required for a paid preparer to sign a client’s tax return, but I highly recommend not preparing returns unless you’re 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.

If you are not a CPA and want to prepare tax returns, I recommend becoming an Enrolled Agent (EA) through the IRS. EAs 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 that you have the knowledge to serve tax clients properly.

You’ll need to choose which accounting program you want clients to use. It doesn’t have to match the platform you use internally.

When evaluating options, consider:

• Whether you can access the client’s books remotely
• The cost of basic bookkeeping for each client
• The cost of adding payroll
• How easy it is for clients to learn
• Whether the software offers a certification or partner program for bookkeeping firms

You’ll also need software for your own bookkeeping practice. Some platforms offer accountant editions that let you manage your books and access client files in one place.

QuickBooks Online is a strong choice. You can use QuickBooks Online Accountant for free by joining the free QuickBooks ProAdvisor program. You can learn more in the guide on becoming a QuickBooks ProAdvisor.

Most bookkeeping or accounting systems include payroll you can activate when you start hiring employees.

QuickBooks offers several payroll options, which you can explore in the QuickBooks Workforce review (formerly QuickBooks Payroll). If you prefer outsourcing payroll entirely, see the guide to the top payroll services for small businesses.

Practice management tools help you organize and track client work. Some even provide a portal to access client books. QuickBooks and Xero both offer integrated practice management features within their accounting platforms.

A secure file-sharing tool lets clients send documents (e.g., bank statements, receipts, invoices, and accounting files) from anywhere. Dropbox is a popular option. You can set up a separate folder for each client so they can upload files securely. This is safer than emailing documents, requires login access, and keeps everything backed up in the cloud.

• Basic package: Ideal for startups or freelancers with minimal transactions. This could include bank reconciliation, categorization, and basic reports.
• Standard package: Suitable for growing businesses with moderate transaction volume. This might include everything in the basic package, plus accounts payable/receivable management and payroll processing (if applicable).
• Advanced package: Caters to established businesses with complex bookkeeping needs. This could include everything in the standard package plus tax preparation assistance, financial analysis, and bookkeeping cleanup for neglected accounts.

When you’re just getting started, it’s usually easiest to offer only the Basic package so you don’t overwhelm yourself with complex work or too many moving parts.

To determine how much to charge as a bookkeeper, it’s important to first evaluate your level of experience, your location, the services you offer, the frequency and complexity of the work, and whether you want to charge an hourly or fixed rate for your services.

See our guide on how much bookkeepers charge for an up-to-date review of bookkeeping rates by state.

Choosing a business name is both a branding exercise and a clarity check. The name should clearly communicate what you do and, if applicable, the niche you serve. Tips include aiming for clarity, using recognizable geographic or industry terms, gathering input from others, and testing the name with potential customers.

You must also choose a business structure: sole proprietorship, partnership, LLC, or corporation. The structure will determine your personal liability, tax obligations, and how you raise capital. Most part-time bookkeepers start as sole proprietors, but growing firms or those hiring employees may prefer an LLC or corporation. Liability varies by structure, so consulting an attorney is recommended.

Before operating your business, you’ll need an EIN, a federal tax ID that identifies your company. It’s free to obtain from the IRS and required for tasks like opening a business bank account or applying for financing.

Once your EIN is issued and your structure chosen, register your business with your state. This may involve filing paperwork yourself on the state website or using an online legal service. You may also appoint a registered agent to receive official communications.

Finally, open a business bank account to separate personal and business finances. This should be done early so startup costs can be tracked properly. Requirements vary by entity type, and many banks offer small-business accounts that fit new bookkeeping firms.

Bookkeepers should have liability insurance to protect against mistakes made on client books. Coverage can include legal defense costs and settlements in the event of a claim. The original guide recommends reviewing CPA and accounting insurance options to understand costs, coverage types, and leading providers.

A home office is the most cost-effective setup when starting out. Meeting clients at their workplace or virtually is recommended, so you don’t need to host anyone in your home. A properly equipped home office allows you to take advantage of the home office tax deduction, which covers repairs, maintenance, and a portion of utilities, real estate taxes, and insurance.

If a home office isn’t an option, virtual office services or shared office spaces provide a business mailing address, phone number, and access to meeting rooms.

Because of the relatively low overhead costs, bookkeeping businesses can be profitable if they have a steady flow of clients and can manage their expenses effectively. The profitability of the business also depends on its size, the number of clients, the level of competition in the market, and the pricing strategy.

No, bookkeepers don’t need any licenses or certifications, unlike other finance professionals, such as accountants and financial planners. Some bookkeepers may decide to earn optional credentials, such as the certified public bookkeeper (CPB) designation.

To determine how much to charge as a bookkeeper, it’s important to first evaluate your level of experience, your location, the services you offer, the frequency and complexity of the work, and whether you want to charge an hourly or fixed rate for your services. The national average rate for an in-house bookkeeper is estimated at $27.27 per hour.

A bookkeeper is responsible for maintaining a company’s financial records, including recording financial transactions, reconciling accounts, paying bills, issuing invoices to clients, generating financial reports, and monitoring cash flow. They may also assist with the preparation of tax returns and other regulatory filings. The specific tasks and responsibilities of a bookkeeper may vary depending on the company they work for and the nature of their role.

Yes, running a bookkeeping business from home is a great option for many entrepreneurs. It offers several advantages, including lower overhead costs, flexibility with scheduling, and overall convenience.