Jumpstart Your Bookkeeping Business

Transcription

1 Jumpstart Your Bookkeeping Business Easy start up, Choose your hours, Work From Home Claire Moore, M.B.A. i

2 Jumpstart Your Bookkeeping Business Easy start up, Choose your hours, Work From Home Copyright 2010 by Claire A. Moore Author: Claire Moore, M.B.A. Publisher: Moore Consulting Service Cover design: Rosamond Grupp, All rights reserved All rights reserved. No part of this book may be reproduced or transmitted in any form, by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system without written permission from the author, except as a reviewer, who may quote brief passages in a review. Printed in the United States of America ISBN 13: ISBN 10: X Disclaimer & Limitation of Liability The statements made and opinions expressed are the personal observations and assessments of the author based on her experiences and are not intended to prejudice or cause harm or offense to any party. It is sold with the understanding that the publisher and author are not rendering legal, accounting, or other professional advice. If such professional advice is needed, then the services of a competent professional should be sought. While all efforts have been made to ensure the accuracy and completeness of the information provided in this book, there may be typographical mistakes and errors/omissions of content in this book. Therefore, this book should be used only as a guide and not as the only source of information of the subject matter covered. The purpose of this book is to educate and provide information and resources about the subject matter covered. The author and publisher specifically disclaim all warranties or any liability or responsibility to any person or entity with respect to any loss or damage caused, or alleged to be caused directly or indirectly by the information contained in this book. Errors and omissions will be corrected in future editions, provided the publisher receives written notification of such. The fact that a company, organization, or web site is mentioned in this book as a resource for further information does not mean that the author endorses the information, products or services provided by the resource. The resources mentioned should be researched and evaluated by the reader and the author is not liable for any information content provided by those resources mentioned. 2

3 Table of Contents Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Self-Employment Are You Really Ready? Bookkeeping And Accounting Clarified What Does It Take To Be a Self-Employed Bookkeeper? Office Space - work from home or rent office space Business Structure Insurance Choosing a Business Name - Who Are You? Internet Access and Build a Valuable Asset - Your Network Chapter 10 Should You Create a Business Plan? Chapter 11 Making the Transition to Self-Employment Chapter 12 What Will You Charge - What Will You Make? Chapter 13 Getting Your First Clients Resources Interviews With Two Freelance Bookkeepers Sample Letters Sample Business Plan Additional Resources 3

4 Chapter 2 Bookkeeping And Accounting Clarified You may have been looking at ads for schools and services that teach bookkeeping and how to start your own business. I notice that some of these use the terms bookkeeping and accounting interchangeably as if they were the same thing. It s important for you to be clear when you talk to people so that you don t give them the wrong impression about what you do. The following descriptions should be of help to you. What Is an Accountant? Accounting is a financial profession practiced by people who have an accounting degree. They perform high-level functions including the design of accounting systems and analysis and interpretation of financial statements. Accountants can become certified with their state board of accountancy by fulfilling education and experience requirements and by passing a rigorous fourpart examination. Once certified, the accountant can add the initials CPA to his or her name. Certification requires adherence to a strict code of ethics and regular continuing education. Businesses and nonprofits often require audited financial statements and these can be prepared only by a certified public accountant. Accountant certification has existed for decades, building credibility and reliability for the profession as a whole. A business professional knows that a certified accountant has a certain level of education and experience, at a minimum, and is held to a very high standard of conduct. Financial statements prepared by certified accountants follow a set of independent accounting standards and therefore can be interpreted according to those standards and compared to other, similarly prepared statements for purposes of decision making. There are other certifications available to accountants that include: CMA: Certified Management Accountant CIA: Certified Internal Auditor Certified accountants may become members of the American Institute of Certified Public Accountants (AICPA) which oversees the profession and provides additional certification opportunities in specialty areas such as financial planning and fraud detection. The Public in the term certified public accountant refers to the fact that the accountant holds himself/herself out to the public as practicing accountancy. Certified accountants are regulated by the state in which they obtained their certification. All accountants follow a set of rules known as Generally Accepted Accounting Principles (GAAP). These accounting principles are created by an independent, nonprofit organization called the Financial Accounting Standards Board (FASB). FASB was given this task by the Securities Exchange Commission (SEC) in

5 The four parts of the Uniform CPA exam cover the rules and requirements for auditing and preparing financial statements, reporting financial information, business procedures, taxes and ethics: Financial Accounting and Reporting Auditing and Attestation Regulation Business Environment and Concepts So, wherever you live in the U.S., the preparation for the CPA exam is the same, the exam is the same, the certification is the same and the rules that you are bound by in your profession are the same. The public knows what they are getting and what to expect when they hire a CPA. For their part, certified accountants all must follow the same rules set by FASB and overseen by the AICPA. So anyone preparing for a career as a professional accountant has a clearly defined path to follow. What Is a Bookkeeper? For bookkeepers, however, the situation is different. First, as far as education goes, you need a high school education and while college classes are not a requirement, some college is helpful. An associate's degree will help convince an employer, or a potential client, of your skills and commitment to your job. Bookkeepers typically perform the daily tasks of recording business transactions and producing basic financial reports. It s possible for a bookkeeper to become certified, but the reasons for doing so and the means of accomplishing certification are different than they are for accountants. Certification will add to your credibility and probably your income as a bookkeeper, but it s not a requirement to being a bookkeeper. On the other hand, for an accountant, professional opportunities may be limited without certification. And some functions, such as issuing audited financial statements, are not possible at all without certification. So while certification is an option for the bookkeeper, it makes a big difference in opportunities for the accountant. While an accountant must become certified through his or her state board of accountancy, there are two certification choices and administering organizations that provide professional designations for the bookkeeper. Organization Designation Web site American Institute of Professional CB (Certified Bookkeepers (AIPB) Bookkeeper) National Association of Certified CPB Certified Public Public Bookkeepers (NACPB) Bookkeeper 5

6 To attain certification as a bookkeeper, both organizations require that you: Pass an exam Have a level of experience Follow a code of ethics Maintain continuing education According to the AIPB web site, their certification examination consists of the following: Part 1 at a Prometric test center Test 1: Adjusting entries. 1 hour. Test 2: Error correction (includes the bank reconciliation). 1 hour. Part 2 at a Prometric test center Test 1: Payroll. 1 hour. Test 2: Depreciation. 1 hour. Part 3 open-workbook test Inventory. Part 4 open-workbook test Internal controls and fraud prevention. All questions at Prometric and in the workbook are multiple choice. Passing Scores and Retests The passing score for each part of each test at Prometric is 75%, and for each open-book workbook test is 70%. An applicant who gets a lower grade can schedule a retest. Preparing for the certification exam AIPB offers self-teaching workbooks that prepare you for each part of the exam. Each workbook drills you with questions like those on the certification exam. You can also do a Google search for bookkeeper certification exam preparation and find schools such as Everest that have classes to help you prepare. The existence of two certification organizations can present a dilemma for bookkeepers. Which one to join? Should I join both? They both seem to offer good benefits. Which one will make the best impression with my clients? Do my clients even know about these organizations? Do I even need to be certified at all? To tell you the truth, as far as I have been able to discover, the general public doesn t know about bookkeeping certification or the institutions that provide it. Whatever certifications you do obtain will no doubt help establish your credibility with the public but what will make the most impression is how you conduct yourself and the quality of services you provide. You don t have to make your decision about certification right away. You should take your time and do research before committing your time and money. Check out the web sites for each 6

7 organization. See what benefits they offer to members. You can join the organizations without becoming certified and see how you benefit from membership. For now, the important thing to know is that you can start your business and solicit clients without being certified. It s more important that you have perfected and continue to improve your bookkeeping skills. Certification is valuable as a means to prove your commitment to your profession but it s no substitute for skill and talent. Summary Let s recap the comparison of bookkeeping to accounting. Bookkeeper Daily functions: receivables, payables, billing, check writing, purchasing, journal entries, posting to ledgers At least high school No certification required No code of ethics unless certified No uniform rules to follow No continuing education required unless certified Certification through AIPB or NACPB Accountant Design accounting systems Review and interpret financial statements Management advisory Degree required: 5 years Certification helpful for advancement Certification includes code of ethics Must follow GAAP accounting principles Certification requires continuing education Certified through the state board of accountancy; membership in AICPA national association Want to know more about the book? Read about the book here. Want it Now? Order on Amazon. 7