Start a Business
Providing a Bookkeeping Service

(Last updated: April 25, 2010)

This page shows how to start a business providing a bookkeeping service. This service is especially useful for new business firms who may not be able to afford an in-house bookkeeper or accountant.

Use this information together with the Business Plan for Simple Services page.

The methods and procedures described on this page can be used to help satisfy your needs, and the needs of likely clients.

Here are the topics:

Introduction to idea
Estimated startup costs
Putting idea to work

Other useful information

The Vital Guidelines for Novices page helps beginners who want to start a business. These guidelines provide focused advice and useful insights.


IMPORTANT

Before using this information to start a business be sure to read the following notice: Disclaimer

Introduction to idea

This topic provides an overview of the business idea so you can decide if it suits you.

Basic idea

Small business owners pay you to keep their books. You record their accounting transactions on your computer, and prepare financial statements for them.

The sharp rise in unemployment has forced many people to start their own small business. Some of these people need help with their accounting work.

This is an indoors activity that can be performed year round.

Suitability of idea

This idea is best suited for people who favor technical activities.

It is also best suited for people who reside in a city.

Skills and equipment required

Primary skills -- You must have accounting or bookkeeping experience or training, the ability to use a computer accounting program, and the ability to communicate effectively with clients.

Other skills -- You must have driving skills and a valid driver's license.

Equipment owned -- This business idea assumes that you own the following equipment:

Computer setup -- You are assumed to own a home computer with large capacity memory and large capacity hard disk. This computer setup should include a laser printer, or multi-function fax, printer, and copier. It also should include any desk, stand, or table needed to support the computer and printer.

In addition, you are presumed to own the popular Microsoft® Excel® and Word® programs.

Vehicle -- You will use this vehicle to visit with clients.

Other items -- You need to own or purchase other items, such as a computer accounting program and office equipment. These items are listed under the startup costs on the next topic.

Profitability of idea

In order to show a profit, you would have to sell enough of your services to cover the startup costs and operating expenses. The more fees you collect over a certain time period the larger your profits. Therefore, you want to have substantial sales, along with low startup costs and operating expenses.

The fees you charge pay for your time and equipment, and your ability to understand accounting matters and use a computer accounting program.

The amount you can charge depends on how well off the client is and how anxious both you and the client are to make a deal. The economic conditions of the local area might also influence these negotiations.

See the Setting the Sales Price page in another section for more detailed information.

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Estimated startup costs

This topic discusses the estimated startup costs for this business idea. Startup costs are what you need to pay in order to be ready to begin business operations. The amount of these costs also helps you decide if the idea suits you.

List of items in startup costs

Note: I am only showing one month for certain expenses. You should be able to get your first job or two in a month. Then these items become operating expenses, not startup costs.

The assumed startup costs for this business idea, using a frugal style of business operations, consist of the following items:

Advertising and promotion (1 month) -- Small classified advertisements in a local newspaper or in newsletters of local business organizations.

Business insurance (1 month) -- Business liability insurance. (Talk to a local insurance agent to see if you need this coverage.)

Computer program -- QuickBooks® Pro or equivalent accounting program.

Computer supplies -- Several reams of good quality 8 1/2 x 11 laser copy paper.

Governmental requirements -- Local fees and business license. (Note: You might also be subject to state and federal deposits and registration fees, but these will vary. So I have not included them in these startup costs.)

Office equipment -- Business telephone, desk accessories (stapler, paper clips, pen and pencils, etc.), and listing adding machine. (Note: Use the kitchen table and chairs for your desk and chair at first.)

Office supplies -- Check blanks for business checking account, file folders or large manila envelopes (for filing papers), letterhead stationery, and lined writing tablets.

Other operating expenses (1 month) -- Business telephone expense.

Dollar amount of startup costs

Here are the dollar amounts for a frugal business operation:

 

Estimated Startup Costs

  Advertising and promotion (1 month) $ 75
  Business insurance (1 month)   50
  Computer program   125
  Computer supplies   30
  Governmental requirements (local fees and business license)   50
  Office equipment   120
  Office supplies   105
  Other operating expenses (1 month)   50
     
       Total estimated startup costs $ 605

Note: See the Planning costs and expenses subtopic in the Business Plan on another page for ways to reduce these startup costs.

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Putting idea to work

This topic satisfies the Starting business operations subtopic in the Business Plan page.

Preparing for business operations

Completing the startup requirements -- This is the last step needed just before you start business operations. See the Listing the startup requirements subtopic in the Business Plan for the items remaining to be completed.

As a minimum, you should have discussed the business idea with your family, set up your business entity, and satisfied all governmental and insurance requirements.

Operating the business

Soliciting clients -- Place classified advertisements in your local newspaper. You might also call on business organizations in your city or town and place advertisements in their newsletters. Use a simple, honest description of your services. (Once you become well known in the community, you should benefit from word of mouth advertising from satisfied clients.)

For additional ideas on soliciting clients, see the Sales Methods page in another section.

Getting clients -- Hopefully, some of the people who read your advertisements will inquire about your services. They may want to know your qualifications and your hourly fee. If you believe you can assist them, the next step is to arrange a meeting. There should be no charge for this initial meeting.

See the preceding Profitability of idea subtopic for my thoughts about setting your fee.

I recommend that you meet with clients in their homes or offices. Your neighbors may object to having a stream of strangers arriving at your home. Also, meeting with clients in your home may violate the zoning rules in your town or city.

The first purpose of this meeting is to determine whether each party is willing to accept and work with the other party.

The second purpose is for the client to select the type and frequency of financial statements desired.

The final purpose is to agree on the scope of the services you will provide, and the frequency and amounts of payments for those services.

After you and the client agree on the service to be provided, you need some background information. Ask the client to describe their accounting transactions and records, the type of financial statements they prefer (have various samples available), and the amount of "hand holding" they will need.

You will need the client's name, address, telephone number, and names of people to contact about routine matters and about important matters.

You also need to agree on how often you will bill the client for your services.

Job procedures

Preliminary service activities -- Here are some preliminary activities you should perform:

  • Prepare an appropriate engagement letter describing the scope of your services and your responsibilities, and have it signed by the client.
  • Set up an appropriate chart of accounts on your computer, using your accounting program.
  • Design the appropriate financial statements for the client.
  • Arrange for your first pickup of the client's accounting transactions.

Main service activities -- Here are the typical activities you will perform for clients:

  • Answering the client's questions over the telephone
  • Visiting the client's office to pick up their accounting transactions and discuss any problems they may have
  • Posting client's journals and other transactions
  • Preparing monthly accruals and adjustments
  • Preparing monthly financial statements
  • Reviewing monthly and/or year end financial statements with the client
  • Preparing any year end accruals and adjustments
  • Preparing the year end financial statements
  • Closing the year end income and expense account balances into the net worth account

Final service activities -- Collect your agreed upon fee from the client. (Your agreement with the client should specify the frequency and amount of payments.)

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