Kickstart your Bookkeeping or Accountancy Business the Right Way. Whether you’re looking to set up a bookkeeping business or you want to use bookkeeping as a stepping stone to further advance into accounting, there are certain rules and regulations to consider to start on the right foot.
Without proper planning and organisation, you’ll find it hard to Kickstart your Bookkeeping or Accountancy Business. Many firms become insolvent within the first year. So to prevent that from happening, we’ve included the most necessary steps to ensure you are on the right path to creating a successful bookkeeping or accountancy business from the outset.
Choosing the right formation
Starting your own bookkeeping or accounting business can be lucrative. The first step going forward is to choose the right legal structure for your business. Whether you choose to work as a sole practitioner or a limited company, you should know what are the advantages and disadvantages of both.
When operating as a sole trader, for instance, you are the sole owner of the business and have unlimited personal liability. On the other hand, a limited company is owned by multiple entities that divide the ownership into shares. One of the biggest advantages of trading as a limited company is that the personal financial risk is significantly reduced, as the business debts are entirely separated from your personal finances. Then again, trading as a sole practitioner is easier and cheaper to set up, plus you’ll be your own boss.
When choosing the right setup, you should analyse from a legal perspective and look into the limited liability protection that you get. Other considerations need to be weighed up too. As a bookkeeper or accountant, you will be all too familiar with the tax position and other key points to consider in both formations. If you are setting up a business with a partner or another director, then we highly recommend you put a Partnerhsip Agreement or Shareholders’ Agreement in place.
Regulatory body
The regulatory requirements of a business depend on a number of factors. Such as what qualifications you hold, the services you provide, and location, among others. Your business must follow these regulations to ensure compliance with legislation, not only to avoid substantial fines but to build trust with clients and also to portray a professional image to potential clients.
AML registration
Once you’ve determined the legal structure of your bookkeeping or accountancy business, you must register with a professional body for the anti-money laundering scheme. This is a must and is key to ensuring your business is compliant with anti-money laundering regulations. There are a number of options that you can choose. Some regulatory bodies include AML supervision. But you can also opt for HMRC or any number of independents that offer it. You are going to need a policy which outlines how you comply with AML Regs. We have tailored a policy that is compliant for accountants and bookkeepers in the UK and which you can purchase from our website here.
ICO Registration
Like most companies that process personal data on behalf of clients, bookkeepers and accountants are required to register with the Information Commissioners Office (ICO) to comply with data protection legislation. Failing to register and pay the appropriate fee can damage your reputation and result in serious fines.
Letter of Engagement and Terms of Business
When signing up a new client, you will need a robust letter of engagement that includes your terms. This should include the services you will provide and how frequently, including a clearly defined scope of work, fees and invoicing information, and frequency of re-engagement (annually, bi-annually). You should also consider data protection, anti-money laundering, liability, disengagement, confidentiality, responsibilities, and more.
It’s not easy to create a robust engagement letter. But the benefits you’ll reap from having one make it all worthwhile. We have worked with many accountants and bookkeepers over the years and we understand how to tailor a letter of engagement that sufficiently protects your business and complies with legislation and regulatory bodies in your industry.
Continuity of Practice Agreement
If your bookkeeping business is regulated, then this will normally be a requirement of your membership. If you aren’t regulated and unsure if you need a continuity of practice agreement, then speak to us, and we can offer you some guidance.
It’s really important to consider what will happen to your client’s work if you are unable to perform it for any reason. This is definitely something you should have in place as a sole practitioner. Having an agreement in place will give you and your clients peace of mind. So that if anything should happen to you, someone else can pick up your client’s work seamlessly with minimal disruption.
Policies and Risk Assessments
If you’ve worked in the corporate world or an accountancy firm, you will be all too familiar with the types of policies you are going to need. Along with the risk assessments which work alongside your policies and business processes. It will depend on the size of your business as to what policies you are going to need. But as a bare minimum, you will require an Anti-Money Laundering and Due Diligence Policy and a firm-wide risk assessment.
A firm-wide risk assessment will help you identify all the potential financial risk areas of your business. So you can work towards preventing them.
Insurance
We don’t want to teach you how to suck eggs, and this is probably an area you have definitely considered. But it’s noteworthy nonetheless. Having insurance in place is a must when you are working as an accountant or bookkeeper. Professional Indemnity cover and, depending on your setup, public liability too. There are a number of insurance providers that will offer this type of cover. However, if you are struggling with the sheer volume of insurance providers we tend to recommend Policy Bee. They cover most industries and have a very streamlined process for obtaining quotes. If you use our affiliate link you will receive a discount on your premium and we receive a small fee too.
Bottom line
Setting up your own business is exciting, and running a successful one takes more than just being legally compliant. Keep in mind that you’ll be your own boss. Which means you need to possess the right skill set and qualities to run a practice on your own. And not bail out the minute things get complicated.
If you need legal advice on starting up your bookkeeping and accountancy business, we offer virtual consultations via Zoom, so don’t hesitate to get in touch.