Freelance Bookkeeping: Are You Keeping Up With The Times?
Posted by Gabrielle on 27 Apr 2010 at 06:35 am | Department: Articles, Case Studies
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?
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Gabrielle,
I have been dooing bookkeeping for the last 10 years. However I was self taught but have done all the Quickbook classes and am a Pro Advisor or was at least. the two clients that I have I worked for previously so I new there books already. I have found that my clients both want me in the office doing the books, and one client is like a full time job. I can come and go as I please but I still feel pressured to be there at least 4 days a week. It is a fairly large non-profit and I have gien them a deal on my hourly rate because they are struggling and cant afford to pay more right now.My question is how do freelance bookkeepers have multiple clients and not go into the office to input daily invoices ect.? I also use Go To My PC as an online tool in case I need to do a check for something for the non-profit.
I think I need some advise.
Bonnie from Boise
Hi Gabrielle
Many of our members have found tremendous success in building their freelance bookkeeping business by networking as much as possible. Attending meetings at the local Chamber of Commerce, BNI and other business type organizations. The key is to have a profesionaliy designed brochure that encourages the reader to ask for the various reports that are mentioned. This give you permission to stay in touch with with in a non intrutive way. I could write an entire book on the subject, but this would be just one place to start.
Gordon Skillen
Institute of Professional Bookkeepers of Canada
Dear Bonnie,
It may be a little cliche but … I feel your pain. I to have several clients who prefer I come into the office at least occassionally. Though I don’t have any that demand as many hours (4 days a week) as yours.
It is wonderful to discount your fees to help struggling clients … however … you must be careful when doing so. Sometimes your client will begin to value your time as you do and discount the relationship simply because you are trying to assist them. Always remember though that discounts don’t feed the family. Use them sparingly and only for limited times. Whenever I bill a client I am discounting I bill for the entire hourly rate and then show the discount separately so they can see what they should be paying as well as what they are paying.
I also use Go To My PC for many of my clients. This allows me to log into their system and perform tasks quickly and easily from my office. I have had great success is getting my clients to assign the task of scanning all incoming documents to PDF files residing on their systems. This allows me to view and work with the documents without having to come into the office all the time. With the price of technology constantly dropping it is no longer horribly expensive for them set this type of system up.
I, like you, really enjoy the time I spend in my client’s offices. However I always try to make these trips around those tasks I am unable to accomplish without their help. I am guilty of just stopping in to say hello at least once a month. I keep my Wednesdays free as a junk day and visit 5 or more each Wednesday. I have 31 clients and am having to turn some away or recommend other bookkeepers.
I hope this helps you solve a couple of your situations. Remember if you value your time at $25 per hour so will everyone else … if you value it at $60 per hour you may loose a couple of clients along the way but you will gain the respect of those remaining and those to come.
Take Care and Be Well
Bob
Bonnie,
I agree with Bob and Gabrielle on the pricing stucture. I really had a problem charging a professional rate, but struggled with too many clients and not enough time. I finally raised the rate and a magical thing happened. I had clients that valued my time and expertise. I also had clients that left me; however, my bottom line didn’t change. I still made the same but with less hours.
This also set me up to be able to afford help. It’s important to charge high enough that when you need help you still have a profit margin after paying your help.
I work almost entirely remote. Through hosted technology and scanning/faxing I have everything I need to work from my office. I even love 2010’s new feature where you can scan documents and attachment them to QB. This is great for when I have a specific question about a particular receipt.
I thought I would miss the interaction between me and my clients, but as it turns out – I still talk with them often. We even get together once in a great while. The great thing is now they feel more productive as well because I’m doing my work and they are doing theirs without interuptions.
Donna
Gabrielle,
Bonnie’s concern above is also a concern of mine. I go to all of my client’s place of business because that is where all their checkbooks, bills, files, deposit records, and whatever other misc. paperflow I need is located. How exactly does one get all of that paperwork when using QB online or even transferring accountant’s copies through the internet.
Thanks!
Robin
I have put my foot down in structuring my business to be off-site. I will not do bookkeeping at a client’s office. Which means I am not conducive to all potential clients. In reality, this has not been a problem. For the business owner, one or two less things they need to worry about-office space, computer, buying software, etc. I have clients that mail, fax, and email me their information. Others are more involved and I visit their office once a week to pick up information and drop off at same time. So much nicer to work at your own location and it appears that my clients like it too!
Thank ya’ll for the advice. I am just starting out and this information has been very helpful.
Teresa
Hi Gordon,
Yes, networking locally is very important, since there is nothing like building relationships face to face! A brochure can be helpful, especially when that information is also available online on the business website. So, my suggestion is to always have your business website address on anything you give to prospective clients (business cards, brochures, etc.)
Thanks for sharing the experiences and success of your members!
Thanks Bob, Donna and Amy for sharing your experiences and advice for Bonnie, Robin and Teresa. Most of the shift often has to happen in our own way of thinking. Old habits always seem to die hard for all of us (self included)!
The very basic way to think about getting all your source information to handle the bookkeeping is to ask yourself, ‘How much of it is already available in electronic form?’ and ‘How much of it could be in electronic form?’ Once it’s accessible electronically, you’re golden!
I have been really trying hard to focus locally, while remaining available for nationwide clients. This was a thought provoking article. Dallas Bookkeeper.