How to start a bookkeeping business

Self-employment is fast becoming a popular career choice for bookkeepers. Whether you’re at the beginning of your bookkeeping career or you’re thinking of making the switch to self-employment, this guide will help you get to grips with starting a bookkeeping business.

The role of a bookkeeper in the digital age

The emergence of online bookkeeping software like FreeAgent has transformed the bookkeeping industry in the last decade, with bookkeepers now able to manage a business’s finances from almost any location. With the software automating many of the most time-consuming tasks, such as reconciling bank transactions and running payroll, bookkeepers in the digital age have more time to take on new clients, provide enhanced services or simply relax.

Meanwhile, communication tools such as video calling and instant messaging apps mean that 'virtual bookkeepers' (as they are sometimes known) can maintain the important human element of their businesses while working with their clients in this new way.

Starting a bookkeeping business

Starting your own bookkeeping business is an exciting prospect and it might be tempting to jump right in. However, it’s important to take the time to write a business plan and consider some important strategic questions before you get started:

Who will your customers be?

Identifying your target customer base from the outset can help you avoid a few headaches down the road! There might be a particular industry or group of professionals that you’re familiar with from past experience, such as IT contractors or marketing freelancers, or you might have a preferred type of business to work with (e.g. sole traders). When thinking about your customer base, it’s important to consider who your customers will be, what services they’ll need and how you will provide them.

Which bookkeeping services are you going to offer?

The services each client needs will be different, but you’ll need to decide which general bookkeeping services you’re going to provide. It’s important to carry out this step before you go on to think about the tools you’ll need to run your business, such as online bookkeeping software, so you can make the right choice. The services you offer might include:

• Entering data into accounting software
• Filing invoices
• Paying suppliers
• Making payments on behalf of the business
• Ensuring regular payments are made (e.g. PAYE)
• Performing customer and supplier reconciliations
• Performing bank reconciliations
• Completing VAT returns
• Chasing late payers
• Scanning documentation
• Preparing books for end-of-year accounts
• Self Assessment and/or Corporation Tax
• Financial statements

When considering which services you’ll provide, it’s crucial to establish where your responsibilities as a bookkeeper will end and where those of an accountant will begin. The extent of your duties, the services you offer and the clients you can manage are likely to reflect your experience or the bookkeeping qualifications you’ve achieved. Be sure to factor in which services you can offer to different clients when planning your business and which are better suited to being handled by their accountant. You can read more about the difference between accounting and bookkeeping in our guide.

What technology will you need?

Robust online bookkeeping software is vital for running a successful bookkeeping business from home. When considering the options, it’s important to choose software that you find simple to use and enables you to provide your chosen set of services. FreeAgent, for example, automates tasks such as inputting invoice data, reconciling bank transactions, running payroll, completing VAT and Self Assessment tax returns and even filing them to HMRC.

In addition to online bookkeeping software, it’s also wise to get your hands on an appointment-booking app to help you keep your calendar up to date once you start working with clients. Digital communication tools, like video call and messaging apps and virtual meeting software, are also essential for running a successful bookkeeping business from home.

When it comes to physical equipment or 'hardware', there’s probably not much more you’ll need than a computer, an internet connection and a smartphone that supports all the software you plan to use to run your bookkeeping business.

Complying with money laundering regulations

Professional bookkeepers are regarded as an accountancy service provider. This means you may need to register either with HMRC or a supervisory body such as the Institute of Certified Bookkeepers(ICB), the International Association of Bookkeepers (IAB) or Association of Accounting Technicians (AAT). To find out whether you need to register, check with HMRC.

Bookkeeping associations provide support and information to their members and some also offer qualifications that can help to attract clients, so it may still be a good idea to join one, even if you’re not required to do so by money laundering regulations.

Using FreeAgent to help you run your bookkeeping business

Voted the Friendliest Software of the Year by ICB bookkeepers for the fourth time in 2023*, FreeAgent makes it easy for bookkeepers to work collaboratively with their clients. It includes all the important features that bookkeepers need to help their clients grow and thrive, such as bulk payroll filing, Open Banking bank feeds and the ability to submit VAT and Self Assessment tax returns directly to HMRC.

All FreeAgent bookkeeper partners have a dedicated dashboard that provides a unique snapshot of all of their clients, along with the option to drill down to manage individual clients in detail. The dashboard’s unique ‘Alerts’ feature prompts bookkeepers to take action when their clients’ accounts need attention and the software provides a range of useful reporting functionality including balance sheets, aged debtors reports and customisable capital assets.

* FreeAgent was named Friendliest Software of the Year at the ICB (Institute of Certified Bookkeepers) Luca Awards in 2023.