Starting a Bookkeeping business has a fairly low investment cost. Many accountants have honed their professional skills, that when they lose their job, they think of starting a business around what they know best. However, I think you would be surprised how many people are willing to jump right back into a steady paycheck when the opportunity rises!
Here are 10 mistakes that you should avoid when starting a bookkeeping busines
1.0 Assume that every business is your potential customer.
Pick a specialty, any specialty. Know that market segment really well. There are tons of differences between market segments. Sure, functionally, the PNL statements look really the same. However, there is tribal industry knowledge that’s really going to helpful. If you specialize, you won’t be trying to cope with say, automotive or insurance realities at the same time.
2.0 Extending Credit to Everyone
Do a credit check on clients before extending credit or billing them. Unethical businesses will try to take advantage of you. Not paying a CPA or a Bookkeeper for work done is completely normal for some people. Reasons why? They aren’t making money, but they need to get their taxes done. Don’t do pro bono work unintentionally.
3.0 No Engagement Contract
Have an engagement contract ready for customers to sign be. It should have billing rates, deadlines, a description of the services that are being offered, and dispute resolution. Remember that you are providing a professional service. Their interpretation of what a bookkeeper does might be different than yours.
For instance, bank statements. They might assume that you will acquire them automatically. However, you will need to acquire them from the customer. This needs to be spelled out in the contract. Never assume that a clear verbal meeting of the minds is a substitute for a contract.
4.0 Assume that Clients will provides paperwork in a timely fashion.
Remember that you are the one providing the services. If you don’t provide a time frame, they will be sending 10 hours of work to you right before the tax deadline or your vacation.
Be in charge and take ownership of when the information is provided to you. Monthly deadlines sent in emails will make most clients happy. Last minute appeals out of the blue to their personal email account at midnight will enrage them.
5.0 Underestimating the time it takes to complete an assignment.
I once had a client who could not be bothered to write down his cash payments so he requested that I go through his personal email account and look for that information. I thought there were a few payments. When I did a search, I realized there had been thousands of cash payments.
Only finalize a quote after examining the data. If the scope increases, make the contract allows you to increase the fees. You will quickly learn that most clients will underestimate the time to do their bookkeeping.
6.0 Customer Loyalty
Remember that it’s a business relationship and those are examined all the time for pricing, effectiveness, and efficiency. Don’t be complacently assuming that they will spend decades paying your monthly billing. Earn that trust each month!
It’s true that some clients will be around for a while. However, there are people who prefer to switch bookkeepers on a regular basis. Ask a few questions. If they have had 3 or more bookkeepers recently, they mock the previous bookkeeper, or they keep asking about your hourly rate, don’t be surprised when you get replaced.
7.0 Trying to Solve All the Customer Problems
Since you are trusted professional, they are likely to talk to you about other issues. Answer honestly and research your answers. However, there comes a time that they need to talk to a tax professional or consult an attorney. Knowing your limits is essential.
I’ve had clients ask me if they will win in court, immigration questions, ask about tax structures in Uganda, and all sorts of items that I’m not qualified to answer. Refer them to people who might know the answer. 🙂
8.0 Assuming that you have all the paperwork.
Provide a checklist of all financial accounts that you have tracked in November. I can’t tell you how many times in April I was told about new bank accounts or credit cards. Have them confirm the list.
One of the clues that might help you out is reading the expense receipts. Usually they have the last four digits of the debit or credit card listed. If you see something new, shoot them an email.
9.0 Not acting like a professional.
I’ve heard stories of bookkeepers crying, emoting, yelling, insulting, or disappearing. Don’t be someone else’s story. Running a business is difficult and is tough. Be prepared to be calm when everyone else is not.
Try to keep the emoting to a minimum. If you hate working with a client, you can always trim your client list in a professional manner. Don’t take on work that you aren’t prepared to follow through. Don’t take on clients who will not pay you. Don’t take on unethical clients, they will eventually throw you under the bus.
10.0 Investing more time and effort than the client is willing to invest.
Diligently working on projects that the client has abandoned. I think this is the most difficult lesson to learn. Clients close their businesses all the time. They abandon passion project, kickstarters, and a host of other endeavers. I’ve had people talk to me for two hours about a project that never gets off the ground.
If you shoot them a follow up email and say: here is the information I dug up, if you don’t get a response, it’s a clue.
If you look at their website and there is no information, it’s a clue.
If they announce a different business plan, it’s a clue.
If they stop paying you, it’s a clue.
If they have an inactive business license, it’s a clue.
If you give them an estimate for the work that they are interested in, and they decide to to not sign the engagement contract, it’s a clue.
Shoot for the last scenario. It’s the least time intensive and it’s the most effective way to ensure that you don’t spend hours on a project that will never happen. 🙂