How to Start a Bookkeeping Business in England and Wales

Suppose you are interested in setting up your own bookkeeping business in England and Wales. You know what the job entails, but you are not sure if there are any legal hoops you need to jump through to set up your business. Perhaps you are also wondering if there are any legal requirements specific to bookkeeping that you should be aware of. This article explains how to start a bookkeeping business. Firstly, it will provide some general tips for all business founders. It will then consider the relevance of professional qualifications, review your regulatory obligations, and explain the importance of professional insurance for your bookkeeping business.

General Tips for Starting Your Business

Create a Business Plan

While not a legal requirement, all businesses should have a business plan – the more you can plan for, the better.

Therefore, it may be helpful to approach this from the perspective of answering questions from a client or potential investor about your business. These questions could include:

• how will you market your bookkeeping services, and what distinguishes you from your competition?
• who are your immediate clients going to be, and how will you source new clients?
• what are your upfront costs to start the business, and how much are they?
• what will your fixed costs be?
• how will you finance your business?
• will you employ anyone or take on a business partner?

Understand Start-Up Costs 

You should have a realistic view of what your upfront costs will be. Things to consider include:

• what your computing and software needs will be, especially considering some accounting software licenses can be expensive; 
• if you will be working from home; 
• how much rent and any associated costs you will pay if you intend to work from an office; 
• cost of marketing materials; 
• fees for insurance policies and legal advice; and
• a rainy day fund. 

Choose a Business Structure

The four most common business structures are:

• sole-trader;
• unincorporated partnership;
• limited company; and
• limited liability partnership (LLP). 

There are advantages and disadvantages to each business structure. However, as a business owner you should be especially aware of the implications of being a sole trader versus trading through an incorporated company, particularly as it relates to limiting your liability. 

Know Your Tax Obligations

The amount you pay in tax will depend on what business structure you trade through. Therefore, you should ensure you know how much you will need to pay HM Revenue Council (HMRC) and when to make your payments. 

Business Bank Account 

Although the banking services your new business will need may be contingent on your business structure, having a bank account in place before you invoice clients is essential. 

Professional Qualifications 

Strictly speaking, you do not need to have any professional qualifications or certifications to be a bookkeeper. However, in practice, you may find it easier to win clients if you have obtained professional certifications such as certain Association of Accounting Technicians (AAT) tests. 

Likewise, consider becoming a member of a professional organisation like the AAT or International Association of Bookkeepers (IAB). You will have access to certain resources and be part of a professional community, which can ultimately help your business.

Accounting vs Bookkeeping

You should also be aware of the services you cannot provide without certain certifications. In particular, usually only chartered accountants can give financial advice about investments or business acquisitions and disposals. 

Anti-Money Laundering Regulations 

The definition of money laundering in the UK is quite broad, encompassing all forms of handling or possessing criminal property, including the proceeds (i.e., money) derived from a crime. 

By law, you must be supervised by an authority recognised by the HM Treasury, such as the IAB or Institute of Certified Bookkeepers (IAB). If you are a member of such a recognised authority, they will help ensure you are complying with the law. 

That said, you do not have to join a professional organisation to comply with the law, so long as you have appointed an Anti-Money Laundering (AML) supervisor and alerted HM Revenue Council. 

Professional Indemnity Insurance 

Let us say you are working for a client to process certain transactions the company has made this year. Suppose you make an incorrect calculation or fail to pick up on a key element of the deal and you do record it as you should have. Your client, relying on this information, proceeds to act as if it is correct. Later, as a consequence of this, your client loses money. 

The law says you can be held liable for this, and the client could claim against you in court for the financial loss. 

Professional indemnity insurance will cover the amount you are liable for and any associated fees or costs. 

Therefore, given the amount of money you could be liable for and that not having insurance can make it difficult to do business, you should consider obtaining insurance upfront. Keep in mind that different policies will provide varying coverage levels at different prices.

Key Takeaways

As with every start-up business, you should ensure that you have a thorough business plan, with particular attention paid to the financial elements when starting your bookkeeping business. You will also want to consider what business structure you should adapt and ensure you understand the implications of incorporated versus unincorporated structures. In addition, you will want to review the importance of qualifications particular to bookkeeping. Similarly, as you may need to comply with Anti-Money Laundering regulations, you should familiarise yourself with your regulatory obligations. You should also consider what indemnity insurance you will need. 

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