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How to Become a Contract Bookkeeper
Are you looking for a new career?
If yes, then please answer these questions:
- • Do you have experience in bookkeeping or accounting jobs?
- • Do you 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, and not just a job?
If your answers were mostly yes, then Contract Bookkeeping might be for you!
So, “What is a contract bookkeeper?”
Contract bookkeepers are usually self-employed bookkeepers who are running small businesses that provide bookkeeping services to other businesses.
Similar to other jobs that offer professional services, some bookkeepers may team up with other bookkeepers to form business partnerships or even create contract bookkeeping companies. Regardless of staff count though, the transaction is always one business buying services from another business.
Contract bookkeeping duties can include:
- • Preparing and lodging Business Activity Statements (BAS)
- • Recording the transactions of a company
- • Maintaining payroll systems
- • Keeping asset and inventory records
- • Maintaining financial records for up to five years after they are prepared, obtained, or the transactions are completed (required by the Australian Taxation Office).
In most cases, a contract bookkeeper is hired to keep necessary records and to prepare the business activity statements (BAS) required by the Australian Taxation Office (ATO). They 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-related services are one of the most commonly requested services bookkeepers can provide. Getting registered means you can legally provide these services for profit.
In order to meet the requirements for BAS agent registration, you must successfully complete the Certificate IV in Accounting and Bookkeeping course. You will also need to complete relevant GST/BAS courses, which can be included as part of your bookkeeping course.
Find out more information on how to become a BAS Agent in this blog 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, then you will need to register for an Australian Business Number (ABN).
Getting one is worth it anyway, as having an ABN makes it easier for other businesses to pay you for your services—which is important! If you don’t have your own ABN, other businesses might take advantage and choose to withhold money for tax from payments for your services.
3. Get Insurance
Getting a Professional Indemnity Insurance (PII) gives professional bookkeepers a ‘safety net’ in case mistakes happen. The PII indemnifies bookkeepers from losses suffered by their clients or other third parties due to negligence, mistakes, error, or failure on the bookkeeper’s part.
Moreover, having a PII also pays the legal costs of defending a legal case a client makes against you. It is an essential requirement of BAS Agent registration, since organisations will be penalised for misreported data in their BAS.
If you want to start a Contract Bookkeeping business, then you’ll need to invest in a good computer and in accounting and bookkeeping software.
Working with the right hardware and software makes bookkeeping so much easier—managing and maintaining financial records become more efficient and creating financial reports becomes faster. Of course, some calculation involved, if not all, are automated by the bookkeeping software.
Usually, bookkeepers choose and specialise only in a single bookkeeping software. Bookkeeping software available in Australia include Xero, MYOB, QuickBooks, Sage, ReckonOne. Membership in professional associations like the Institute of Certified Bookkeepers gives bookkeepers easier access to these software; plus, you’ll be given too (from other bookkeepers of course!).
There are also bookkeeping courses that specialise in accounting and bookkeeping software training. This will help you become an accredited expert in using your chosen software, therefore increasing the number of services you can provide.
5. Find a workspace
Contract bookkeepers can do their jobs from their own homes, particularly if they are only providing remote/online services for their clients.
As a contract bookkeeper, you may claim some tax benefits if you work from home, but you should be careful. Those deductions can affect capital gains tax on your house should you decide to sell it, or you could be caught for breaching council zoning laws.
Today’s technology has made it easier to do bookkeeping remotely and even more recently, raw data from companies can be simply sent by email or uploaded to the cloud. Doing so allows bookkeepers and accountants to process data from almost anywhere.
Renting office space is also an option for contract bookkeepers. A formal workplace is the better and professional choice if you regularly meet with clients physically.
Also, there are clients who prefer that you to go to their office to fulfil your bookkeeping duties. They may request your presence on-site to provide some services, such as setting up bookkeeping software and looking through physical transaction records.
However, bookkeepers and clients alike might be more reluctant to conduct business face-to-face after this pandemic.
6. Set your bookkeeping rates
Setting your price is extremely important.
Charging the same rate you’d be paid if you were working for someone else sounds reasonable, right?
While that may be the case, running your own business costs more, because you also need to cover your overheads. You have to pay for good equipment, stable internet connection, workspace rent or work station set-up, and your PI insurance. You also need to pay your own taxes (don’t forget this!), make superannuation contributions for yourself, and cover any holidays you want to take.
Forgetting to account for all client expenses is a big mistake for any bookkeeper, so always remember to check on yours as well. Of course you don’t want to lose money out of your own pocket!
We have a couple of guides on the topic to help you out: 12 Key Bookkeeping Expenses Business Owners Should Not Forget and How to Set Your Bookkeeping Rates.
7. Find clients
The single most important step in starting a contract bookkeeping business is of course having clients to provide your services to.
Perhaps this should have been the first step! At the same time though, don’t you need equipment and training before you even think of providing bookkeeping services?
It’s a bit of a catch 22. Anyway, going back to getting clients…
Pull in favours, pick up the phone and do cold calls, offer bookkeeping services to family and friends, advertise your business offline and online, use your networking skills! Whichever promotional effort you do, work hard at building a solid customer base as soon as possible!
Why are contract bookkeepers required?
For many business owners, doing their businesses’ Business Activity Statements is too complicated, and yet, it’s too simple to employ a full-time bookkeeper or accountant for.
They will look for you because, as a contract bookkeeper, you can provide expert bookkeeping services for their business without them having to worry about long-term employment.
Why small businesses love contract bookkeepers
If any inexperienced person incorrectly calculates BAS, their business will 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, but it is significantly cheaper than miscalculating the payment due on a BAS statement or employing a full-time bookkeeper with the same expertise.
Degree-qualified accountants can also perform BAS services if they have the right registrations. However, they usually charge higher rates than contract bookkeepers because they have additional training and qualifications.
Contract bookkeeper vs “employed” bookkeeper
Unlike contract bookkeepers, employed bookkeepers are employed directly by an organisation for their full-time service. They are not required by law to be qualified, to be a BAS Agent, nor to have any experience.
As a bookkeeper this is a great way to develop experience. These are good for learning about the situations and problems that you may encounter when you become a contract bookkeeper.
To get a job as a full-time bookkeeper though, employers might still ask if you have professional experience or qualifications. Bookkeeping courses that can help you start a career in financial services include:
- • Certificate IV in Accounting and Bookkeeping
- • Diploma of Accounting
They even include units on GST and payroll principles with an option to take a Tax Practitioner Board-approved exam. Successfully completing these bookkeeping and accounting courses can certainly help you get your BAS Agent registration in the future.
Moreover, the Diploma of Accounting can also be used for Tax Agent registration, which opens up a whole new world of work opportunities!
Other Questions and Considerations
What are Business Activity Statements?
Business Activity Statements (BAS) are forms submitted to the Australian Taxation Office (ATO) 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 get paid doing BAS, get registered!
If you’re preparing BAS for your OWN business, your partner’s, or a friend’s, without any 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. When you have completed enough hours of experience, you can put in your own BAS Agent application.
In the meantime, you will need to get another agent, such as the Australian Bookkeepers Network BAS Services, to assume the role of the BAS Agent for your clients. You can use their services to get your business off the ground while you accumulate bookkeeping experience.
You may operate this way indefinitely, but doesn’t becoming a BAS agent yourself sound better? For one, it will immediately tell your clients that you are fully qualified and experienced to handle their BAS needs.
Develop your credibility
The most overlooked component in succeeding as a contract 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, as genuine testimonials are valuable, especially if they’re from industry leaders.
Earning qualifications from bookkeeping courses, registering as a BAS Agent, and joining a professional bookkeeping or accounting association also make you and your work more credible.
Other Bookkeeping and Accounting Careers
Some bookkeepers ultimately expand the scope of their businesses by offering training services or by becoming a qualified bookkeeping trainers. This helps them share their skills and knowledge with the next generation of bookkeepers and accountants.
Inspire Education offers the latest “train the trainer” qualification, the TAE40116 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 an opportunity to become an accredited trainer for bookkeeping courses.
Here’s a shortened rundown of what it takes to become a Contract Bookkeeper:
1. Register as a BAS Agent: Take up the Cert IV in Accounting and Bookkeeping to be eligible
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. Buy your Equipment: Get reliable hardware and software for your business
5. Create a Workspace: You can even do it from your computer at home!
6. Set Your Rates: Make sure your rates cover more than just your expenses
7. Find Clients: Network and build a customer base
Get started today and give Contract Bookkeeping a go!