I’m happy to introduce the first in our brand new series of freelance bookkeeper interviews where you’ll hear from grassroots freelance bookkeepers who are in the trenches building their businesses from the ground up.

This very first interview is about 33 minutes. So take a break, grab your favorite beverage, and sit back and get to know fellow bookkeeper Connie Carlson, who transformed her business dream into her reality.

Connie Carlson

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It seems we are constantly hearing about how we need to “go green” and cut down on paper. They say, we “should” be turning to digital or paperless ways of handling documents. It’s just good for the planet (supposedly). But there really is more to it than that.

If you’re working virtually with any of your clients (meaning, you work from your office instead of theirs), using electronic documents becomes even more important.

Despite this, and the fact that my own business has been 100% virtual since 2003, I have a confession to make.

I’m only currently about 75% paperless at this point. Getting closer to 95% has not been as easy as I had hoped. That’s mostly due to my own internal resistance.

As necessary as it has been to use paperless methods to work with my clients, I’ve found that most of my own business procedures are still quite paper-based.

So I decided to sit down and come up with both the Pros and Cons of going paperless internally to determine whether I really need to push myself to get closer to that 100% paperless ideal.

Here’s what I came up with:

Pros for going paperless:

• Easier to work with your clients virtually – I’ve mostly got this one handled since the benefits are nearly a necessity and go straight to the bottom line. They include…
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  • More flexible schedule – that’s because I work in my office not in theirs
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  • More efficient – can handle more work in the same amount of time, which means more billable hours
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  • Increased geographical service reach – my clients can be located anywhere, not just my local area
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  • Travel cost savings – rarely do I need to travel to see my clients face to face, and when I do, it’s a real treat to visit with one another
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• Saves money on office supplies – I recently compared my costs over the past few years when I’ve started using more scanning and a dual monitor set up, and the cost savings related to paper and toner have been significant, especially during tax season. These savings will only increase by using more scanning and PDF documents for my internal operations
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• More secure – all my digital files are stored (at least in backup form) online. That is far more secure than paperwork with sensitive data, even if stored in locked file cabinets (which could be destroyed by flood or fire). Digital documentation also can be attached to bookkeeping records for bullet-proof documentation if ever audited.
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• Space saving and convenient access – This one is significant, since over time accumulated paperwork can take up a lot of space and it’s a pain in the butt to have years of old documentation shredded. Finding needed records in digital form is also much more convenient and fast, since they can be searched if “misplaced” and, at least for me, my digital organization is better than how I’ve been organizing my paper files.
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• It’s Green – Although I know the real motivation when my banks nag me to get email statements instead of paper copies (it saves them money on paper and postage costs), the more paperless I’ve become the less trash is coming out of my office. And the less trash we all produce definitely makes a difference to the waste load on our planet.
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So, if all this powerful evidence is FOR going paperless, why have I still felt some internal resistance to changing over more of my internal operations?

Let’s take a look at the arguments against going paperless:

Cons against going paperless:

• Dependent on third party internet services – There is some loss of control when using any web-based services. If your Internet access goes down, or your service provider has server problems (like Intuit has had more often than you’d expect), you may not be able to get access to your documents 100% of the time. The actual percentage of time this happens is not high, but it does happen and can cause frustration. I know this from first-hand experience with some of the SaaS (software as a service) solutions I use regularly.
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• Changing habits – handling documents and procedures in a new way means workflow needs have to be updated and new habits formed. This has probably been my biggest resistance factor. Despite the fact that I’m often teaching my clients the latest high-tech ways to use QuickBooks software, the “if it ain’t broke, why fix it” mentality still nags at me, too.
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• New Costs – While going paperless creates some very significant cost savings, as noted above, there are some costs involved in changing how we deal with digital documents. That includes dual monitors (I could not live without dual monitors now), a scanner (if you don’t already have one), and a document management solution for storing and managing your digital documents (highly recommended). In reality, these costs are quite low compared to the BIG savings in the Pros section.
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My conclusion: The Pros far outweigh the Cons by a long shot.

My New Goal: From this point forward, convert my own “back office” operations to digital format, starting immediately.

This includes using my favorite document management system for all my own business operations.

Document Management Using SmartVault

This coming Thursday, March 31st at 8:00 p.m. Eastern Time I’ll be holding a brand new online training surrounding the use of SmartVault.

This FREE webinar training is designed especially for freelance bookkeepers who want to go paperless using this must-have online service for working with your clients on a virtual basis. But you can also try out this amazing and versatile tool for your own business for free for as long as you like.

Click Here to Get all the Details
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In the previous post we discussed some of the benefits to YOU for taking your bookkeeping business virtual. But there are some significant benefits to your clients for letting you take their bookkeeping online as well.

One of the big ones is, it can actually save them THOUSANDS of dollars in taxes, interest and penalties. No kidding.

To illustrate what I mean, let’s take a look at a Tax Court case that took place earlier this year. (K. J. Fessey v. Commissioner of Internal Revenue)

If this self-employed loan consultant had used a virtual bookkeeper to not only keep his books, but a paperless solution to handle all the paperwork, he would have saved himself a HUGE amount of time and tax dollars.

This sole proprietor ended up owing over $11,000 in taxes and over $4,700 in interest and penalties, with the vast majority of that being due to business deductions that the Court determined he could not claim.

Why were so many of his business expenses disallowed by the Court?

One word: Substantiation.

It wasn’t because these weren’t truly viable business expenses, but rather, he could not prove that the expenses were directly related to his business.

Didn’t he keep records?

Yes, but much of his recordkeeping was done using his American Express credit card statements alone. With the statements he had documentation of who he paid, how much and on what date, but nothing more. Because he did not have his receipts, there were no additional details to prove WHAT the money had been spent on specifically.

The Court denied many of his business expenses because a credit card statement alone is not evidence of the business purpose of an expense. Receipts contain details that demonstrate the nature of the purchase; just noting the vendor is not proof enough that the purchase was for business purposes.  (i.e., just because you buy something at Staples doesn’t mean it was for your business)

Receipts provide the best substantiation of business expenses and need to be stored with the credit card statements or financial records files, for tax purposes.

So how does a Virtual Bookkeeper come to the rescue?

Having complete bookkeeping records would have given him better documentation. Additionally, by using a paperless solution, electronic copies of his receipts would have been saved and tied to each transaction. He would have had air-tight proof of his business deductions. None of his deductible expenses would have been lost.

Since most small business owners don’t like to be bogged down with keeping track of all the receipts, using a paperless solution is a way to get rid of the clutter and conveniently provide the information you need as a bookkeeper to properly keep the books.

By simply scanning receipts as they come in, or gathering those that are already in electronic form, and sending them to an electronic dropbox, your client can forget about the bookkeeping AND feel secure that nothing will be lost. Should the IRS come calling, they could easily breeze through a tax audit unscathed.

And of course, we all know how difficult it can be do to “after the fact” bookkeeping from bank and credit card statements alone. So going paperless makes your job much easier, too.

If going virtual and converting business expenses to a paperless system sounds like a good fit for your business, consider which of your clients are vulnerable and would benefit most by switching to virtual bookkeeping and paperless expense tracking.

To get started, all that’s needed is a scanner.

I also highly recommend considering the use of document management software, such as SmartVault. I use that program myself, and it is a great all-in-one solution for your virtual services that also works seemlessly with QuickBooks. It’s easy and convenient to use both for you and your clients. And convenience is a BIG motivation for getting your clients to go paperless.

If the concept of using the Internet and electronic solutions in your freelance bookkeeping business is new to you, you may want to catch the replay of the free training webinar I did last week, “Taking Your Bookkeeping Services Online” (See below for details)

No matter how you decide to do it, one of the BIG reasons your clients will want to work with you, is because you can protect them from a very painful tax audit by making sure their business expenses are adequately substantiated (with receipts) and accessible.

That kind of protection is worth a lot and will help your clients, or potential clients, see the true value of what you can do for them.

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Free Resources

“Taking Your Bookkeeping Services Online” – This free training webinar replay shows you why bookkeeping services through the Internet is the wave of the future, and why getting onboard now will make your life easier and your business more profitable.

Here’s what a fellow bookkeeper had to say about this webinar:

I got so much helpful information last week on the webinar.  Just started using SmartVault and LOVE it!  Told my employer he has until the end of the year to get over keeping paperwork too.
– Karen Howell

The webinar replay is free, but it will only be available through October 31st.

=> Get Access to the Webinar Now

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SmartVault document management solution. This is an all-in-one paperless solution that also integrates with QuickBooks. In fact, SmartVault started as a QuickBooks document management product, and now is a total online solution for handling paperwork on a virtual basis. You can start using it for your own business (recommended) as well as for your clients for free (no obligation to upgrade). I use SmartVault in my own business, and believe this is the best choice for Virtual Bookkeepers.

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Recently an article was published in one of our industry organization’s newsletters that took me a bit by surprise. They claim to “raise your professional status as a bookkeeper by making sure you are up to date.” They touted that, “We also give freelancing bookkeeping tips, such as how to market and charge for freelance bookkeeping – and how to start your own freelance practice.”

Sounds good, right?

Well, you be the judge. They went on to hold up as a model freelancer one of their members who had started her own freelance bookkeeping business. Here’s how she did it.

She left her employer, but started doing their bookkeeping on the side at $500 per month while she pursued another full-time job. Then she took on another part-time job at night so she could save up some money to start her bookkeeping business full time.

She then created a flyer that simply stated the type of bookkeeping work she could do and sent it out to 20 local CPA firms, which she found in the Yellow Pages. She got one response and was interviewed. Thereafter she got a couple referrals. She stated, “That’s all it took…after that, it was all referrals and word of mouth.”

Her business grew and she went on to hire two “freelance workers”  and took on commercial office space. Her “freelancers” tended the office while she served her clients at their locations “sometimes because of the tasks (e.g. filling out payroll forms), sometimes because of the software (Peachtree and MAS 90), but mostly because she sees it as essential to good service. ‘If I owned a business, I would not want to wait to see my updated books until my bookkeeper delivered them,’ she says.”

She ultimately converted her freelancers into legal employees, paying them the same hourly rate as before, but with the added employment taxes and expenses. She acknowledged that “new IRS scrutiny of ICs who may qualify as employees was also a factor.”

The case study ended with the member stating how her business had caused her to become a different person because her clients’ depended on her so much that it had given her life new meaning.

While there are certainly some good lessons in this case study for new freelancers, does this strike you as an “up to date” example of how to start and run a successful freelance bookkeeping business?

Let’s take a closer look at the lessons that can be gleaned here. I’ll also make some suggestions for improvement. If you are just starting out (or need to update how you are growing and running your business) I can assure you that you can definitely work smarter and avoid some of the dangerous pitfalls you’d hit by modeling this case study too closely.

Good Lessons

She started her business part-time while still bringing in a steady income. Getting your business off the ground is a gradual process.

Getting your first client(s) from those who already know you. It’s the best place to start your marketing!

Marketed her services to local CPAs. They can be a good source of referrals, but they should certainly not be your only form of marketing! Most new bookkeepers will not be so lucky.

Updates for Service

She worked at her clients’ offices. There is still a market for this type of service, but it is the least profitable. Seek to work online for your clients wherever possible. Use web-based bookkeeping solutions (such as QuickBooks Online Edition), a hosted solution (such as RightNetworks.com), or at least a QuickBooks Accountant’s Copy and/or file transfer services for near immediate delivery. You will be able to serve many more clients in a day and it will be much more convenient for everyone involved.

The most popular bookkeeping software for small business now is definitely QuickBooks. Peachtree users are a dying breed, and MAS 90 is all but defunked. QuickBooks holds 95% (or more) of the market share for small businesses who use bookkeeping software. Join the QuickBooks ProAdvisor Program to stay up to date and get certification.

Pitfalls

DO NOT hire freelancers if you need employees. The IRS is very clear on this and it is not “new” for the IRS to scrutinize “ICs who may qualify as employees.”

If you do not want to hire employees but consistently have more work than you can handle, raise your rates and refer your overflow to colleagues. My sense is that our “model” freelancer was not charging enough for her services right out of the gate. Don’t make that same mistake.

And by the way, her freelancers were being underpaid too. She was paying them the same hourly rate as employees as she was when they were ICs! You should not be paid the same rate as an employee.

My conclusions: Start your business where you are, but make sure you do so professionally. Educate yourself about advancements in technology to keep your skills up to date and running your business most efficiently. If you’re serious about creating a business (not just another job for yourself), hire employees if you need to, but have a consistent marketing plan and charge professional rates.

What advice could you share with those just starting out as new freelance bookkeepers?

One of the most common questions I hear about becoming a freelance bookkeeper is, ‘What credentials do I need?’

The real answer to that question has more to do with the type of freelance business you want to build. But for the purposes of this article, we will assume that you are focusing on handling the month-to-month bookkeeping of your clients as their sole bookkeeper.

You’ve Got Choices

I’ve found that most freelance bookkeepers are concerned with the technical skills needed to provide quality service. Of course, that is a good place to start.

So, if you’re starting from zero, the first step is to learn the ropes academically. Here are a few choices to consider:

the basics you need may be available locally in a classroom setting. Check a nearby community college or continuing education programs to see if there are any live classes offered for bookkeeping certificate programs.

If that is not available in your area, or you can’t fit classroom training into your schedule, you may want to consider self-study training courses available online. Penn Foster Career School offers a couple of choices for self-paced training that are good quality.  You can either get a Certificate in Accounting or take their Bookkeeping program.

Universal Accounting’s Professional Bookkeeper training is another option.
This training is a self-study program that takes the traditional paper-and-pencil approach. It is a course that centers on small business bookkeeping, designed and taught by a CPA. It also includes a module on practical steps for starting your freelance business.

Are You Certifiable?

If you already have a good understanding of bookkeeping principles, but want the credibility (and confidence) that comes with a few letters you can add after your name…

AIPB’s Certified Bookkeeper training which provides the CB (Certified Bookkeeper) certification is probably your most economical and recognized option for a professional bookkeeping designation. This is a thorough self-study, traditional debits-and-credits approach from the oldest industry association for our profession. I suggest that you pursue this after you already have a good, basic understanding of bookkeeping under your belt. You will also need some on-the-job experience in order to qualify for the certification.

NACPB’s Certified Professional Bookkeeper training provides the CPB (Certified Public Bookkeeper) designation. This is another self-study training option geared toward those who wish to start their own bookkeeping business, created by a CPA.

Of course, the best training, after you have the academics down, is real-world experience. But you can only get that kind of “training” by actually doing client work.

There are a variety of ways to get that hands-on experience, which range from offering to do the books for a friend or two who own businesses, to subcontracting from an established freelance bookkeeper, to working directly for an accounting firm. Working as an accounting temp may also give you the opportunity for varied experience, if you can land gigs with small businesses. (Experience with large corporations will be of little help in running your freelance bookkeeping business.)

Of course, it goes without saying (though I’m saying it here), you will also want to set up your own set of books and keep good records to apply what you’ve been learning AND see how it feels to be a business owner!

Finally, when you’ve got the bookkeeping principles and practices firmly ingrained, there will be one other major learning curve to tackle in the freelance bookkeeping puzzle. You must learn to use QuickBooks. The vast majority of small businesses use this software, and you will need to learn to use it correctly and well. Just knowing accounting principles does not mean you know how to use this “user-friendly” software accurately.

There are many bookkeepers (as well as CPAs!) who think they can just “fake it” with QuickBooks. That is certainly not the case, and those who do, often cause their clients frustrating problems rather than providing quality services.

So in my next article we’ll tackle this topic – Which QuickBooks credentials and training do freelance bookkeepers REALLY need?

In the meantime, if you need to brush up on your bookkeeping know-how, or start pursuing a certification program, for credibility and confidence before starting your business (or to enhance your existing services), then check out the options above and take action this week. Then let us hear about your success!

Remember, in tough economic times, small business actually need clean books more than they do in fat economic times. Opportunities abound right now for qualified freelance bookkeepers.

Gabrielle

When I was a kid first learning how to ski downhill, I actually read a book about it. (Yes, I know. I’m a geek. But I didn’t want to break any bones, since I knew that skiing could be risky.) I checked out the skiing equipment, talked to a few friends who already knew how to ski, and tried to imagine how it worked – the mechanics of it all. But I didn’t really figure out how to ski until I got out there myself on the bunny hill and started watching the little kids zipping around like it was nothing. They made it look so easy.

It wasn’t.

But when I finally got the courage to put on the skis myself and ”Just Do It,” I learned. Sure, I fell down a lot. But I continued to watch those who were skiing much better than I was, watching their techniques, how they handled different challenges. Then I’d try doing them myself. And you know what? I became a decent skier in a relatively short period of time!

It’s really no different when it comes to starting and building your own freelance bookkeeping business. However, when I was starting out, I didn’t really have any role models to learn from. I just read a few books (the few that I could find) and jumped in. Yep, I tumbled more than a few times too. But now, 18 years later, I think I’ve got the hang of it.

But the path I took when starting my business was not typical, and I didn’t face some of the challenges that I know many of you do. So instead of just drawing on my own expeience, I wanted to provide a more well-rounded appraoch for seeing how it can be done. That’s why I’ve decided to interview several freelance bookkeepers who are at diffrent stages of success with their business in the coming months.

The idea is that we can all learn, grow and improve, no matter what level of success we’ve achieved so far. No one knows everything there is to know about everything. There are so many ways to start and run your freelance bookkeeping businesss. By seeing a variety of real life examples–sharing the ideas that paid off, and the ones that bombed–we can all reach our goals quicker and easier.

This month, accomplished freelance bookkeeper Sylvia Jaumann has stepped up to be the first case study and share her experiences of how she was able to get her home-based bookkeeping service off the ground from zero to what it is today, a thriving full-time business.

Thanks Sylvia for letting me interview you for the blog! So let’s get right to the questions, shall we?

What was it that made you decide to start your own bookkeeping service?

I’ve pretty much always wanted my own business because I have a strong independent streak. I also got tired of working for bosses who didn’t value my skills or pay me what I thought I was worth.  Once I found out that I could be making $10 – $15 more per hour working for myself, it seriously motivated me to launch my own bookkeeping business.
 
What were the very first steps you took in getting your business going; how did you get your very first client?

I struggled for the longest time with all the logistics I would need to run a freelance bookkeeping business.  Getting a business license and setting up my office was a no-brainer for me.  But when it came down to how I would keep track of all my clients, track my billing and stay organized, I was immobilized with doubt and fear.  I ended up subcontracting for another bookkeeper for a year and this helped me fill in all the blanks as I learned a ton of organizational skills from her.

I picked up my very first client through word of mouth.  I’ve acquired the majority of my clients this way.  I’ve done newspaper advertising and have received enquiries from potential clients, but I seem to find better quality clients through referrals than from other ways to promote myself.   

How much experience and/or technical training as a bookkeeper did you have before starting your business?

I’d had about five years experience working for others before I felt confident enough in my abilities to venture out on my own.  My formal education consisted of basic bookkeeping courses and an income tax preparation course.  I’ve found that’s all I’ve ever needed and it’s worked well for me.
 
What are the three biggest mistakes you see people make when they try to start their own bookkeeping business?

1. Undercharging for their bookkeeping services, thereby undercutting other local bookkeepers.  Not only is this unfair to other bookkeepers, but it’s a disservice to themselves.  Generally, it’s a lack of confidence that prompts bookkeepers to not charge enough for their services.
   
2. Being so hungry for work that they accept every bookkeeping job that comes along, even those jobs that they should probably be passing on.  Bookkeeping jobs that involve a year’s worth of paperwork stuffed in a box are not for the faint of heart.  It can be very frustrating, as often times critical information is missing.  Then there are the clients who don’t pay their bills.  Many times you only find this out after you’ve begun work on the project.
   
3. Not requesting a retainer for new clients.  This is a huge mistake made by bookkeepers who think that if they request money up front, the client will run.  Most clients will not bat an eye if you request a retainer as long at it’s reasonable.  Lawyers and accountants demand them, so why shouldn’t we?

What’s the best way to avoid those mistakes, or to fix them if someone has already made them?

1. Find out what other bookkeepers are charging and raise your rates accordingly.  You may have to gradually increase your rates with existing clients.
   
2. If you discover that you’ve received a box of unsorted paperwork, request that the client organize it for you (unless you want to do it yourself).  If you explain to the client the amount of money that they will save by sorting it out themselves, oftentimes they will do it.
   
3. Always request a retainer up front for new clients.  If a client is not paying your bill on time and you’ve already taken him on, inform him that no further work will be done until your bill has been paid.  Then get a retainer for all future work.  Once the retainer is used up, request another one.

If a close friend came to you and asked for your advice on getting started with a bookkeeping service, what would you tell her or him?

I’d tell them about the organizational systems I’ve developed in keeping my clients on track.  Setting up a system so that you always know at a glance what remittances need to be paid as well as being able to find important information at a moment’s notice. These are crucial skills for freelance bookkeepers.  Also, I’d tell them to always get a retainer up front before beginning any new bookkeeping jobs!
 
If you had it to do all over again, what would you do differently?

I would have taken the leap a lot sooner than I did. I wouldn’t have let fear and doubt hold me back from living my dream. I wasted too many years working for other people and missed out financially because of this. 

If you had to do it all over again, what would you do the same way?

I’d talk to people and not be afraid to mention that I have a bookkeeping business.  I’ve obtained so many clients by just doing that one thing alone!  Also, I’m not afraid to ask for referrals.
 
What do you think are the biggest challenges facing freelance bookkeepers today?

The biggest challenge I’ve come across are the mom and pop businesses where the mom (with no bookkeeping experience) ends up doing the bookkeeping herself in order to save money.  These small business owners think that as long as they can learn an accounting program that they can easily do the bookkeeping.  We all know this isn’t the case.  Then, at year end, the messes that have been created by the lack of experience ends up costing them more with their accountants than if they’d let a competent bookkeeper handle it in the first place.  It’s frustrating when people aren’t willing to invest in the essential expertise needed to run their business.
 
What’s the biggest challenge you’ve faced in your business so far?  How did you overcome it?

My biggest challenge was finding the self-confidence to actually make the leap into starting my own business.  I knew how to do bookkeeping but had no idea how to manage clients.  I was worried about finding the right systems to keep track of all the work and possibly missing important remittances and deadlines.  To overcome this, I ended up subcontracting for a bookkeeper for a year and learned many tricks and tips from her.  It was a good educational experience for me and gave me a huge shot of confidence.
 
How long did it take you to get enough clients so that you were working full time?

This is tricky because I’d had clients off and on for years before I finally decided to venture out on my own full time.  I’d say from the time I finally decided that I wanted to do this full time to when I actually did, was about eight months.  During this time I gradually reduced my hours at my job.

Do you have any “secret” tips, tricks or techniques that you can share with us that very few people know about that will give us an edge?

I don’t know if this is much of a “secret”, but a trick I use consistently is to setup as many recurring transactions as possible in each client’s accounting data.  I do this for bank charges, monthly debit charges that appear monthly on bank statements, vendor invoices and even for deposits.  Once I’ve figured out where something should be posted to, I don’t want to have to look up the account number every time I post.  This saves a ton of time and keeps me posting consistently to the same accounts.
 
Thanks Sylvia! You shared some really great information and insights with us!

Sylvia told me that she loves to help others get started in this business because she knows how rewarding it can be. In fact, I found out that that is the very reason she has actually written her own ebook on how to start your own bookkeeping business. It’s called, appropriately, “Secrets to Starting & Running Your Own Bookkeeping Business”

I’ve read her book and I can recommend it to anyone who is looking for a systematized way to handle the business. As you can tell from the interview, that’s a key point to what has made Sylvia’s business so successful. She’s developed and proven her techniques. I’m glad to have her ebook in my virtual library because I’m always looking to improve by watching others who are doing well (just like I did when skiing!). Would you benefit by doing that too?

Check out Sylvia’s book here———> Click Here!

So, what did you like best about the interview? What insights did you pick up from Sylvia’s experience? Did she say anything that raised questions for you? Let’s hear about it from you!

Share your comments right here on the blog!

~Gabrielle