Starting your own bookkeeping business is an opportunity to turn your knack for numbers into a rewarding career. As the need for small business accounting services grows, bookkeeping is a great industry to get into for those with an aptitude for numbers, organization, and helping others.

In this guide, we’ll provide an overview of the bookkeeping business, industry trends, and steps to get started so you can successfully launch your own bookkeeping practice.

Business Overview

Bookkeeping is the backbone of any business. As a bookkeeper, you’ll be responsible for tasks like processing invoices and payments, reconciling bank statements, tracking income and expenses, preparing financial statements, payroll processing, ensuring taxes are calculated and paid on time, and other accounting services.

While some businesses hire their own internal bookkeepers, hiring independent bookkeepers to help is becoming increasingly popular. This is particularly true when a business is smaller and doesn’t have the demand or budget to justify hiring a full-time bookkeeper. As a result, independent bookkeeping services may balance multiple accounts at any one time.

Independent bookkeepers are often operated by a single person – the business owner – though successful businesses can expand and hire a roster of bookkeepers. Thanks to the internet, some businesses even operate entirely remotely, never meeting with clients in person. In these instances, the bookkeepers on staff can also be located remotely. Operating as a virtual bookkeeping business increases a business’ access to potential clients, making for a larger client base.

Industry Overview

The bookkeeping industry is vast and varied, catering to businesses across all sectors and sizes. With the increasing complexity of tax laws and financial regulations, demand for qualified bookkeepers is on the rise, making it a stable industry with reliable income potential.

With the increasing complexity of tax laws and financial regulations, demand for qualified bookkeepers is on the rise. Over the last five years, the bookkeeping and payroll industry has grown at an annualized rate of 2.7% and in 2023 is expected to generate $66.2 billion in revenues.

Over the next five years, the industry is expected to continue growing at a moderate pace of 2-3% annually. Key trends shaping the industry include:

• Increasing use of automation and AI: Bookkeeping software and automated solutions are reducing the need for manual data entry and allowing companies to offer more streamlined services. Adoption of these technologies will continue.
• Shift to cloud-based platforms: Many bookkeepers are transitioning from desktop software to cloud-based platforms that offer more flexibility, collaboration, and real-time financial data/reporting for clients.
• Specialization: Larger players are increasingly specializing in niche areas like particular industries, while smaller players focus on localized services. Specialization allows tapping into specific client needs.
• Security enhancements: Data security and privacy regulations are increasing demand for security features like data encryption and access controls in bookkeeping software and systems.
• Consolidation: Mergers and acquisitions among large national players will continue as they seek economies of scale. Small localized providers will remain competitive.
• Competition from HR services: Bookkeeping providers face competition from expanding HR services firms adding bookkeeping to service bundles. Larger bookkeeping firms that can provide integrated services will have a competitive edge.

Target Market

The target market for a bookkeeping business can be quite diverse, as almost every small business owner needs some form of bookkeeping. However, the specifics will depend on your business model and specialization.

The best clients for bookkeepers are small organizations without sophisticated internal accounting departments but with significant enough needs to justify outsourcing the work. Establishing a niche or specialization can also help target potential clients in a specific industry.

Checklist To Start A Bookkeeping Business

Starting a bookkeeping business isn’t just about having the technical skills to balance sheets and record transactions. It’s also about understanding the nuances of the industry, staying ahead of trends, and knowing how to market your services effectively. This guide aims to give you a strong foundation, from understanding the business landscape to answering common start-up questions.

Step 1: Research the Industry

If you’re considering starting a bookkeeping business, the first step is to familiarize yourself with the industry. This involves researching the bookkeeping services market, understanding the needs of potential clients, and identifying your competitors. Spending time working in a bookkeeping or accounting role can give you invaluable hands-on experience and insights.

To enhance your understanding, consider subscribing to industry publications, joining relevant forums, and attending networking events or webinars. These platforms provide opportunities to connect with industry professionals and stay abreast of the latest trends and developments.

Education is another crucial aspect. While a degree in accounting isn’t mandatory for starting a bookkeeping business, having one can boost your credibility. There are several online courses available that can help you master the basics of bookkeeping and accounting. Websites like Bookkeepers.com (Free), Skillshare, Coursera, and Udemy offer helpful courses.

Additionally, obtaining industry-recognized certifications can set you apart from your competition. The Certified Public Bookkeeper (CPB) certification from the National Association of Certified Public Bookkeepers (NACPB) and the Certified Bookkeeper (CB) designation from the American Institute of Professional Bookkeepers (AIPB) are two highly respected certifications in the industry. These certifications require passing exams and fulfilling certain experience requirements, but they can significantly enhance your reputation and earning potential.

Step 2: Assess the Market

You’re eager to start your bookkeeping business, and that’s great. But enthusiasm needs to be backed by data. Why? Because knowing whether there’s a demand for your services is essential. You don’t want to invest your hard-earned money and valuable time into a venture only to find out the market is saturated or simply not interested. So, the first step in your journey is all about researching, figuring out if there’s enough customer base for your bookkeeping business.

This research may also help uncover a particular niche or service to focus on. Specializing in a specific industry can set you apart from generalists. Whether it’s medical practices, restaurants, or tech startups, each niche has its unique set of bookkeeping needs. This information forms the foundation upon which the rest of your business plan and subsequent operations are built.

Step 3: Write a Business Plan

While this isn’t a required step, it is one to strongly consider. A business plan serves as a blueprint that helps organize your thoughts, outlines your business’s goals and how you plan to achieve them, and lay out strategies for growth.

Also, if needed, a business plan is needed when trying to get funding from lenders.

Related: How to write a business plan

Step 4: Source Funding

Starting a bookkeeping business can be comparatively low cost, especially if you plan to operate from home or virtually, which eliminates the need for a physical office space. However, even with low startup costs, you can’t go in without a financial game plan.

Take stock of what you have and make a list of what you need to get started. This will help you gauge whether you have enough money to get off the ground and figure out where to find funding.

If your personal savings are falling short, you may need to explore other avenues like loans or financial help from friends and family. If you’re considering a bank loan, lenders generally require that you invest a significant portion of your own money (often around 15-25%), have a solid credit score, and have sufficient collateral. If the bank feels the loan is too risky, they might recommend going the route of an SBA loan guarantee to secure additional funding.

Related: Finding the money to start a business

Step 5: Register the Business

With the market research, business planning, and funding out of the way, the next crucial step is registering your bookkeeping business to make it legal of operate. Each state has different requirements, but let’s go over the general needs.

Business structure: First, decide on the business structure that best suits your needs. Generally, there are four types to consider:

• Sole proprietorship: Simplest and least expensive to set up. All profits and losses flow directly to you. However, this structure offers no liability protection.
• Partnership: This involves two or more individuals sharing ownership. Like a sole proprietorship, a partnership offers no liability protection but is straightforward to set up.
• Corporation: Offers liability protection but is the most complicated and costly to form.
• Limited Liability Company (LLC): Combines the liability protection of a corporation with the simplicity of a sole proprietorship or partnership.

Each structure has its pros and cons. For instance, LLCs and corporations offer liability protection and potential tax benefits. On the other hand, a sole proprietorship is quick to set up and inexpensive but offers no protection for the owner’s personal assets. As for what’s most common for bookkeeping businesses, there’s no one-size-fits-all answer, and it varies depending on your specific needs and location.

Related: Comparison of business structures

Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.

Related: Tips and ideas for naming a bookkeeping business

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Obtain business licenses and permits: Unlike the Certified Public Accountant (CPA), there is no licensing specifically for bookkeeping businesses.  There is a national certification from multiple organizations that may provide credibility in your skills to potential customers.

While there aren’t bookkeeper-specific licensing requirements, there will be general business registrations that will vary depending on where the business is located. Some of these include a business license and Employer Identification Number (EIN), among others.

Related: What licenses do bookkeeping businesses need?

Step 6: Set Up Operations

Getting your bookkeeping business up and running involves more than just paperwork; it’s about setting up your operational base. Small bookkeeping businesses can avoid rental costs by operating out of a home office, but if a home office isn’t available or is impractical due to the need to meet with clients, the business will need to rent office space.

Purchasing equipment is another important step. A reliable computer with a good internet connection is a must, as most of your work will likely be done online. You’ll also need bookkeeping software. Some bookkeepers will focus on one particular accounting software, while others will be more flexible. There are a lot of popular choices, like Quickbooks, Xero, Freshbooks, and Wave Accounting. Fundamentally they all do the same thing, so that it may be worth at least familiarizing yourself with all of them.

Step 7: Create a Marketing Plan

With most of the steps out of the way, it’s time to get a game plan together to let clients know you exist.

Finding your first client will be challenging as there are no word-of-mouth referrals from happy clients yet. Your marketing will have to be professional-looking, and a few common marketing activities include social media marketing (LinkedIn and Facebook business pages), print advertising, and online advertising. Bookkeeping businesses may also implement customer referral programs or network with local Certified Public Accountants (CPA) should they have overflow work.

Networking has always been a cornerstone in this industry, and joining local business organizations like the Chamber of Commerce can open many doors for you. If you plan to specialize, joining related industry organizations can be a great way to find clients as well.

Related: Low-cost ideas to market a new business

Step 8: Prepare to Launch!

As you near the finish line of starting your bookkeeping business, there are some remaining steps that may still need to be wrapped up. Every business will have different needs, but here are some additional tasks to consider:

Business insurance: There are several types of insurance to consider when starting a bookkeeping business. A few of these include:

• Errors & omissions insurance or professional liability insurance is possibly the most critical insurance to consider as a bookkeeper is E&O or professional liability insurance. As a bookkeeper, you are taking care of sensitive financial data, and if you make a mistake (which could be very costly) or do not keep records accurately, the client may sue. Generally, policies can cover $1 million in coverage for less than $50 per month. 
• Commercial property insurance protects the business against the financial loss it would face if its office and equipment were ever lost in an event like a fire. If you are working from home, be sure to check your policy to make sure it covers any business items.

Related: What types of insurance does a bookkeeping business need?

Bookkeeping: Funny enough, as a bookkeeper, you’ll need to set up your own accounting and bookkeeping system. Utilize your expertise and establish a system for tracking your income, expenses, and financial reports.

Contracts: You’ll need to draft service agreements outlining the scope of your services, payment terms, and other details. For instance, a Bookkeeping Engagement Letter is a common contract used in this industry to define the relationship between the bookkeeper and client. RocketLawyer and Law Depot have free and inexpensive templates that may be helpful.

Bank account: A separate business bank account is important for managing your finances effectively and maintaining clear financial records.

Pricing: Determine how much you’ll charge for your services. Whether you choose hourly rates or fixed fees will depend on your target market and the services you offer.

Accepting credit cards: Credit card processing allows for greater payment flexibility, which can be a selling point for some clients. Services like Square or Stripe make it easy.

Grand opening: Plan a launch event or special promotion to attract your first clients. This could involve hosting a webinar, offering a discount on your services, or partnering with local businesses to cross-promote each other.