Inspire Education's news
How to Become a Contract Bookkeeper
Are you looking for a new career?
- • Do you already work in bookkeeping or accounting or have a head for numbers?
- • Do you have an analytic mind?
- • Do you want to be your own boss?
- • Do you need flexible hours so you can look after your kids?
- • Are you up for a challenge?
- • Do you want a career path, not just a job?
If, yes then contract bookkeeping might be ideal for you.
Now you may ask, “What is a contract bookkeeper?”
Contract bookkeepers are usually self-employed bookkeepers, running their own small business, who provide bookkeeping services to other businesses.
When a contract bookkeeper is hired, the transaction is one business buying services from another business.
Some contract bookkeepers may join with other bookkeepers to form a business partnership or create a contract bookkeeping company.
Contract bookkeeping duties can include:
- • Preparing and lodging Business Activity Statements (BAS),
- • recording transactions,
- • maintaining payroll systems,
- • keeping asset and inventory records, and
- • maintaining financial records for five years after they are prepared, obtained or the transactions are completed (required by the Australian Tax Office).
In most cases, when a contract bookkeeper is hired it’s to keep the necessary records and prepare the business activity statements required by the Australian Tax Office. Contract bookkeepers can also provide other BAS services like setting up computerised accounting systems that calculate GST and generate tax invoices for customers, consulting on BAS issues or talking with the ATO on behalf of a client.
Steps to becoming a contract bookkeeper
1. Register as a BAS Agent
Registering as a BAS Agent is an important step in starting your own contract bookkeeping business. It is not strictly essential and there are ways around it (explained later). However, BAS services are one of the most commonly requested and essential services you can provide. Registration means you can legally provide those services for profit.
You must complete at least a Certificate IV in Bookkeeping or Accounting in order to meet the requirements for BAS agent registration. You’ll also need to complete relevant GST/BAS courses which can be included as part of your Certificate IV course (like we’ve chosen to do).
For more information on how to become a BAS Agent, check out our article here: How to Become a Registered BAS Agent
2. Get an Australian Business Number
If you’ll be turning over more than $75,000 a year, you’ll need to register for an Australian Business Number.
It’s worth getting one anyway, as an ABN will make it easier for other businesses to pay you for your service (which is important!).
Other businesses can also choose to withhold money for tax from payments to you if you don’t have an ABN of your own.
3. Get Insurance
Professional Indemnity Insurance indemnifies professional bookkeepers from losses suffered by their clients or other third parties due to negligence, mistakes, error or failure on the bookkeeper’s part.
Professional Indemnity Insurance also pays the legal costs of defending a legal case a client makes against you. It is an essential requirement of BAS Agent registration.
Most bookkeeping is done on computers these days. To do so, you’ll need a decent computer and accounting software.
It’s much easier to manage and maintain financial records on a computer, and faster to produce financial reports. Much of the calculation work involved can be automated by the bookkeeping software.
Most bookkeepers choose and specialise in one bookkeeping software package. MYOB and Quickbooks are two of the major software packages available in Australia.
Joining a professional association such as the Institute of Certified Bookkeepers can have additional benefits, such as free or discounted licenses for bookkeeping software packages.
There are also specialised training courses available for most popular accounting programs. You can become an accredited expert in using some software packages which increases the number of services you can provide clients.
5. Find a workspace
Contract bookkeepers can operate out of their own homes, particularly if you are only providing remote/online services for your clients. You can actually claim some tax benefits if you operate from home but be careful – those deductions can affect capital gains tax on your home when you decide to sell, or you could be caught out for breaching council zoning laws.
Some clients might even prefer you to go to their place of business to fulfil your bookkeeping duties and you probably will need to be on site to provide some services like setting up accounting software. Modern accounting software has made it much easier to do bookkeeping remotely and these days raw data can be simply emailed or uploaded to the “cloud” for you to process from anywhere.
You can also rent office space. A formal office looks more professional if you have clients coming to meet you in your workplace on a regular basis. Having an official shopfront also makes it easier to get walk-in business.
6. Set your bookkeeping rates
Setting your price is extremely important. Why not charge the same rate you’d be paid if you were working for someone else? Sounds reasonable right?
When you’re running your own business, you also need to cover your overheads. You’ll have to pay for equipment, a website, internet, rent on a workspace and insurance. You also need to remember to pay your own taxes, make superannuation contributions for yourself and cover any holidays you want to take. Forgetting to account for expenses will mean you’re losing money out of your own pocket!
We have a couple of guides on the topic to help you out:
7. Find clients
The single most important step in starting a bookkeeping business is having clients to service. Perhaps this should really be the first step! At the same time, you need equipment and training to provide bookkeeping services, so it’s a bit of a catch 22.
Pull in favours, cold call, offer your services to family and friends, advertise your business offline and online, or use your networking skills – work hard at building a solid customer base as soon as possible!
Why are contract bookkeepers required?
Business Activity Statements are too complicated for many business owners to calculate on their own. Those small businesses may not be able to afford to employ a bookkeeper of their own.
As a contract bookkeeping service provider, you can provide expert bookkeeping services to many small businesses at the same time.
Why small businesses love contract bookkeepers
If an inexperienced person incorrectly calculates BAS, the business can incur significant penalties:
- • Calculate and pay too little and the business will have a tax bill and can be fined by the ATO.
- • Calculate and pay more tax than is required and it can hamper the business’s growth.
The upfront cost of paying a contract bookkeeper may seem intimidating to small business owners. However, it can be significantly cheaper than miscalculating the payment due on a BAS statement or employing a bookkeeper with the kind of expertise contract bookkeepers develop.
Degree qualified accountants can also perform BAS services if they have the right registrations. However, they normally charge higher rates than contract bookkeepers because they have additional training and qualifications.
Contract bookkeeper vs “employed” bookkeeper
Employed bookkeepers are employed directly by a business. Employed bookkeepers are not required by law to be qualified, be a BAS Agent or have any experience.
Getting employment as a bookkeeper is a great way to develop the experience you need to solve all the problems that will be thrown your way as a contract bookkeeper. To get a job as a bookkeeper, employers will most likely still like you to have professional experience or qualifications. Suitable courses to start a bookkeeping career include:
These qualifications can also be used towards your BAS Agent registration in the future. They even include units on GST and payroll principles with Tax Practitioner Board approved exams which are essential for your BAS Agent registration. A Diploma of Accounting can also be used for Tax Agent registration which opens up a whole new world of work opportunities!
Other Questions & Considerations
What are Business Activity Statements?
Business Activity Statements are forms submitted to the Australian Tax Office (ATO). They are used by all businesses to report their tax obligations.
- • Goods and Services Tax (GST)
- • Pay As You Go (PAYG) income tax instalments
- • Fringe Benefits Tax (FBT) instalments
- • Luxury Car Tax (LCT)
- • Wine Equalisation Tax (WET)
- • Fuel Tax Credits
- • Instalment notices for GST and PAYG instalments
Contract bookkeepers must be a registered BAS Agent to prepare or lodge Business Activity Statements for a fee or other compensation. This requirement extends to a range of BAS related services, such as dealing with the Tax Commissioner on behalf of a client. Basically, if you want to do BAS and get paid, get registered!
Only people or entities providing those BAS services for a FEE need to register as a BAS Agent. If you’re preparing BAS for your OWN business, your partner’s, or a friend’s, for NO fee or compensation, then you don’t need to be a registered BAS Agent.
Find out more on how to become a registered BAS agent here – How To Become A Registered BAS Agent
Can’t register as a BAS Agent yet?
If you don’t have the training and experience to become as BAS Agent yet, don’t panic. Becoming a BAS Agent is not strictly essential. You can operate as a contract bookkeeper without being a registered BAS Agent.
You will need to get another agent, such as the Australian Bookkeepers Network BAS service, to assume the role of the BAS Agent for your clients. You can operate this way indefinitely; however, it is worth becoming a BAS agent in your own right. It demonstrates to clients that you have the qualifications and experience to handle their BAS needs.
You can also use these services to get your business off the ground while you develop your experience. When you have enough hours of experience logged, you can put in your own BAS Agent application.
Don’t forget your credibility
The most overlooked component in succeeding as a bookkeeper is credibility. If a business owner is going to give you sensitive financial data and ask you to prepare legal financial documents like Business Activity Statements, then trust is a major concern.
Credibility can truly only be developed by demonstrating your competence over time. Word of mouth from one business owner to another is a huge help too – genuine testimonials can be very valuable. You can enhance your credibility by earning qualifications, registering as a BAS Agent and joining a professional association.
Other Bookkeeping & Accounting Careers
Some bookkeepers also ultimately expand the scope of their business by offering training services, or becoming a qualified bookkeeping trainer to help share their skills and knowledge with the next generation of bookkeepers. Inspire Education offers the “train the trainer” qualification, Certificate IV in Training and Assessment, to help you get started on this alternative career path. Combined with your accounting and bookkeeping qualifications, this opens up opportunities to become a trainer of accredited bookkeeping and accounting courses in Australia. Don’t forget to get quality FNS40217 RTO training resources or FNS50217 RTO materials to support your training and delivery of these sought after courses!
Here’s a shortened rundown of what it takes to become a bookkeeper:
2. Get Your Own Australian Business Number: To make paying for your services easier
3. Apply for Professional Indemnity Insurance: Protect yourself and your customers in case of an error or omission
4. Create a workplace: You can even do it from your computer at home!
5. Set Your Rates: Make sure your rates do more than just cover your expenses
6. Find Clients: Network and build a customer base
So get started today and give contract bookkeeping a go!