The number of small businesses has never been greater and is increasing at an astounding rate each year. Research has also shown that about 75% of Americans are thinking about starting a small business. A good percentage of these new businesses will require employment of an outside bookkeeping service.
What is the Difference
Between Bookkeeping and Accounting?
Although many times the two words are used interchangeably, the two duties of bookkeeping and accounting are actually distinct and it's important to know the difference.
If you are a bookkeeper, your duties are to mechanically enter money transactions into journals, make adjustments, and prepare reports, usually called financial statements, but with no attempt at interpreting, only presenting the monetary results.
In most larger companies, a bookkeeper that is responsible for entering all sales and payments from customers is called an Accounts Receivable Clerk. In the Payroll Department, Purchase orders and employee checks are entered into another journal by an Accounts Payable Clerk. In a small company, both responsibilities can usually be handled by the same person.
On the other hand, if you are an accountant, you are in charge of actually designing and setting up the bookkeeping system, overseeing the bookkeeping process to make sure it is working efficiently, and present the financial statements, that the bookkeeper has produced, to the business's management.
In a small business, one person, usually the owner of a small “accounting” or “bookkeeping” business, will perform both as a bookkeeper and accountant. Larger accounting business's can also take on and perform both as a bookkeeping and accounting service, for example, H & R Block.
Skills and Knowledge
You Will Need
You must be a thorough, detail oriented person in order to satisfy your clients need for very accurate results. Mistakes could result in your client losing income or getting into trouble with the government.
You have to enjoy and be skilled at working with computers and have a knowledge of computer software, especially accounting and spreadsheet software. If you happen to lack a knowledge of computers and bookkeeping, it is relatively easy to acquire some degree of expertise at a community college near you.
You need honesty and integrity in dealing with customers that might want you to do something like hide income or not report it to the income tax officials. You should be willing to decline such jobs and be able to find clients who will not compromise your integrity and get you into trouble.
Start Up Costs
and Potential Earnings
Your initial investment will probably be between $3,000 and $12,000 depending on the quality of the equipment you purchase. If you already have much of the equipment needed and work from your home, your initial expense could be much less. However, it does give you some idea. You will need at least the following equipment for your bookkeeping service start-up assuming you start from scratch:
A Mac or PC laptop computer for portability, with removable hard drives.
Multifunction printer/fax/scanner/copier.
Office furniture, especially an ergonomic chair.
An automobile, especially if you decide on a mobile bookkeeping service.
A typical annual gross income for a thriving bookkeeping service is between 30K and 70K per year.
First Steps
- You can take courses at a community college near you in accounting. Usually, a good course lasts one year and is divided up into two one-semester sessions consisting of training in both bookkeeping and accounting.
