This article examines the first step in starting a successful homebased accounting and bookkeeping service — your office.
Your first rule of success for any home-based business is to stake out your territory. You need to locate a place in your home that is away from the main traffic path of the home, and has as much solitude as you can find. If nothing else, find a corner of a room as far from the door as practical. Or, if circumstances allow, it is best to use a separate room.
Stay away from the kitchen table. That’s the worst place in the home. The kitchen is, for most families, the busiest room in the house. Beside all the distractions, you are constantly having to interrupt your work and set your papers aside for a meal. Then, when you want to get back into it, you will need to make sure all the milk, ketchup, and whatever else has been thoroughly cleaned, or you might be doing work over again.
You will need something to work on. A folding table works well for some. Others want the prestige of having a beautiful cherry wood, executive desk. Since most clients will never see your working environment, the choice is simply one of your personal preference, and how much you want to spend on your surroundings. If money is an issue, pick up a six-foot folding table at your local discount store. If you like the smooth feel and attractive look of a big solid wood desk, keep in mind it won’t make a difference in how many clients you get, but it might make a difference in your pocket book.
For more infomation about getting started successfully with your own accounting and bookkeeping service, check out our courses.
In this article, we take a look at essential business tools you will need to start your accounting and bookkeeping service.
Whether you have a computer or not, you ought to have a working electric typewriter, but nothing fancy. If you don’t have one right now, don’t despair. This Saturday, go to a garage sale or two, and you will surely find one for very little money. Make sure it works before you hand over the cash.
Why do you need a typewriter if you have a computer? Occasionally, you might be asked to fill out a preprinted form. Have you ever tried to fill out a form with a computer printer? It’s not that easy — so a typewriter will save you time.
We recommend you apply for a business telephone line. In most states it’s no longer required that you have a separate business line, but it is still advisable. There are two good reasons for a separate business number:
Your company’s name will be placed in the yellow pages. This will provide you with credibility, and enable your clients to find you if they need to. By the way, this does not mean you should buy an ad in the yellow pages — that would be a waste of money. You’ll read more about advertising in another article.
You’ll preserve your personal life. A separate number will allow you to screen your calls. For example, if you are just sitting down for dinner and the business line rings, let it transfer to the answering machine. On the other hand, if it is during business hours, and you are performing work for a client and a private call comes in, let the answering machine take the message. Also, if you have children at home, it’s a good idea to instruct them not to pick up the business line. You want to appear professional, and most businesses don’t have children answering their phones.
A fax machine can be very helpful to communicate with clients, as well as getting information to and from prospective clients. Just an inexpensive model will probably handle your needs. They can also often be used in a pinch as a copier.
As for copy machines, you can probably do without this for now. Most of us have a copy store within a mile of our home, where we can get these services when we need them. When you consider the cost of purchasing and maintaining these machines, the copy stores become a bargain.
For more infomation about getting started successfully with your own accounting and bookkeeping service, check out our courses.
An article written by Stephen W. Gilbert listed “10 Pieces of Advice to Succeed in Business.” His tips applied to all businesses. They were simple and concise, so I decided to share his tips, followed by a commentary on how they apply to an accounting and bookkeeping service. Here they are:
Keys to Business Profitability
Work on the business, not just in the business.
As accountants, we can easily get mesmerized by the mechanics of doing the books for a company, and eventually, get into a rut. Take time each day to identify ways your business can run more smoothly and profitably.
Build the business.
Always be on the lookout for new clients. Spend a few minutes every day marketing the business. Try out the marketing tip from this newsletter each week. Even if you’re satisfied with the clients you have, you never know when one might up and leave you. Furthermore, if you have potential clients “banging on your door” you can easily justify raising your fee, or hiring another freelancer to split the fee with — they do the work, you get half the fee.
Cultivate professional relationships.
Join a networking group or chamber of commerce and then get involved. If you’re not sure what I’m talking about, see, “Use networking events to get leads for your accounting service!” at the link at the end of this article.
Under-promise and over-deliver.
Your greatest asset is a happy client. They’re quick to recognize the extras they’re given. Look for articles that will help them. Identify and share profit-building ideas with them. Point out trends, both good and bad, that they may not have noticed.
Delight your customers [clients].
Although this one is a lot like the previous one, it does mean taking customer service a bit further. Go out of your way to help them even more. Offer to prepare collection letters to their delinquent customers, search for better terms/pricing for some of their goods, even straighten the client’s company restroom when you notice it’s in need.
Be on time.
Most people don’t think twice about being five to ten minutes late for an appointment. It’s even to the point that most people plan on their doctor, attorney, and accountant, running late. Distinguish yourself as being different by always meeting deadlines, and being on time for appointments. At first, your client may not think twice about your promptness, but in time they will respect you for your word.
Check back with the customer [client] periodically.
If you’re only contacting your client when you need something, they may begin to dread your calls. Instead, somewhat randomly, call your clients and ask them how they’re doing. Ask them if you can help them somehow. The more burdens you remove from their shoulders, the more valuable you will become to them (and the better references they will provide).
Give written bids on every job.
Put in freelancing terms: “Provide a letter of engagement to every new client.” This is not a contract, it’s simply a letter listing the services you agree to provide, and stating your fee. Remember to include the payment terms and your guarantee.
Discuss payment expectations before you begin the job.
This is a given. The engagement letter will help to formalize your fee. Don’t forget to always pick up the set-up fee before you start your work for the new client.
Get a business checking account as soon as possible.
Don’t mix business and personal finances. Until you know what your business makes and spends, independent of your own personal needs, you can never determine even if you are making money or not. Keeping finances separate also makes things easier when tax time comes around.
Wrapping It All Up
Being in business for yourself can be so rewarding when your business is sufficiently profitable and your customers are happy. The tips above are just a few of the critical “must-do” things you can do to bolster the bottom of line of your business and that of your accounting and tax clients.
It is a sad fact that in school, we learned so little about the inner workings of a small business. Yet, small business is where much of the wealth of this country comes from. The majority of those making over $70,000 per year own their own businesses. If you don’t work for yourself, your chances of making a really great living for yourself and your family are pretty small. At the same time, growth in the small business sector continues to outpace that of large companies, and small businesses need someone to do their books.
With Professional Bookkeeper™ training focused squarely on the profitable small-business sector, your opportunities have never been greater! The Professional Bookkeeper™ program will teach you step-by-step how to find clients that are the most profitable for your accounting service. You will learn techniques to get clients to gladly pay $30 to $60 per hour for your work.
Learn More About the Professional Bookkeeping Program
You Can Do This!
So what are you waiting for? Your financial future is in your own hands. When you start your own successful Accounting service, your success is your own. If you can find the courage to take the first step, we will give you the tools, support, and training you need to start your own profitable accounting and bookkeeping service.
For more information about getting started successfully with your own accounting and bookkeeping service, check out our courses.
This article examines essential marketing and identity elements for your startup homebased business- your business cards, letterhead, and envelopes.
Business Cards and Letterhead are important to all business professionals. To many, your business card might be the only thing with which they have to judge you. For that reason, it’s a good idea to spend a little bit more and get something that favorably represents you. On the other hand, the costly, foiled, raised print might be all right for the lawyer and real estate agent, but it isn’t necessary for the accountant. Something in the middle will be suitable.
Today, you can purchase business cards from the corner copy store, or from professional print shops. Or, if you have the right equipment you could even make them with a computer and printer.
At the copy store, you can view books of card samples. Most cards start at $15 for five hundred cards, and go up. Again the cheapest isn’t necessarily the best. Pick out the best sample that fits you. The printer will then help you place your information into the format of the card.
If you want to be more creative, a print shop will help you design the card. They also have samples.
One more thing: Don’t clutter your cards with too much information or gimmicky graphics. Put the most critical items on the face of the card. If you feel there is still more you would like to say on the card, then have it printed on the backside.
Letterhead and envelopes should be attractive and professional. Use a high-quality bond paper, not standard weight copy paper. Again, a few extra dollars can usually go a long way in impressing your clients.
If money isn’t an issue, and you don’t mind spending a few extra hundred dollars for just the right image, you can contract a graphics artist to design a unique card and letterhead just for you. Most people don’t take this step, nor do they need to.
For more infomation about getting started successfully with your own accounting and bookkeeping service, check out our courses.
What Kind Of Tax Advantages Do Home-Based Businesses Enjoy?
You have probably thought of many of the benefits of running your own successful accounting and bookkeeping service. From the independence of working for yourself to making better income than you may currently make, there are many reasons that starting a home-based business might be right for you. One consideration that you might not have taken into account is the tax advantages that you will enjoy with a business run out of your home. Let’s explore these qualifying deductions, starting with the better-known ones.
The Home Office Deduction
The deduction that likely comes first to mind that home-based businesses can take advantage of is the “Home Office Deduction”. The Home Office Deduction allows you to deduct some or all of the expenses of your office at home and related expenses.
To qualify for this deduction, your home office must be the principal place where your business is done. Secondly, the office space must be used exclusively for business use to qualify. For example, if you use your kitchen as your primary workspace, it is likely that you cannot take the home office deduction, assuming that you use it for personal use as well. To be on the safe side, set aside a room as your home office where possible. This will keep you on the safe side should the home office use ever come into question.
Detailed explanations of who qualifies for the Home Office deduction are defined in detail by the IRS themselves.
Building-Related Expenses
Repairs and improvements to your home office are completely deductible. For example, painting your home office is an expense that relates directly to doing business out of your home, so it is deductible in full.
Mortgage interest is deductible as a percentage of the total mortgage paid for your home. For instance, if your home office makes up 200 square feet of your home’s 2,000 square feet total, you can write off up to 10% of the mortgage interest for your home as a business cost. Similarly, if you rent your home, the percentage of your home used exclusively for business use would also be deductible.
Property taxes paid for your home also qualify at the same percentage rate as the mortgage.
Furthermore, if you own your home, you can depreciate the appropriate share of the home over 39 years.
Note that home expenses not related to your business, such as landscaping costs, cannot be deducted, even if you are beautifying the appearance of your home to enhance its appearance for business purposes.
How Much Total Can You Deduct?
You can deduct at most in home expenses for your home-based business what its net profit is. Thus, if you don’t make much net profit, neither will you be able to deduct many home office expenses. This covers expenses specific to your home itself, such as mortgage/rent and property taxes.
Security
You may deduct the business cost of security devices and monitoring fees as a percentage of the protected area used for business use of the entire protected area (normally the entire home). This is considered an indirect cost of doing business.
Insurance
If you own your home and pay home owner’s insurance, you may deduct a percentage of that expense, as with mortgage or rent expenses. If you have additional insurance coverage that covers things specifically for the business, you may deduct these expenses in full as direct business expenses. This may include special riders on your insurance policy to protect business equipment used exclusively for your business.
Additionally, if you incur a loss that is not covered by insurance, if it is equipment used exclusively for your business, you can deduct the entire loss. If the property lost is for things used both for personal and business use, you may deduct just the percentage of business use.
Utilities
Using the same percentage that you can write off of your home calculated above, you can write off utilities such as electrical, gas, and other utilities as business expenses.
Transportation
If you work primarily out of your home, you can typically write off the transportation expense of getting to and from your clients’ places of business and other business-related transportation costs. For the 2004 tax year, the standard cost per mile that the IRS allows you to deduct is 37.5 cents per mile.
Transportation as a deductible cost is one area where detailed records is critical. Typically, you will want to record the odometer mileage of your car before and after your trip to determine the number of miles traveled. Alternately, if you have places that you often travel to, you can just record the number of miles once and then multiply by the number of trips to determine total mileage This will prove much easier than recording each trip’s mileage
Moving Expenses
If you move, you can deduct the business portion of the move. For example, if half of the items to be moved were business-related, you could deduct 50% of your moving expenses. Note that moving expenses apply to sole proprietors, LLC’s, and S-Corporations only. They do not apply to C corporations.
If you have business-related moving expenses, use form 8829, “Expenses for the Business Use of Your Home” to report them.
Phones and Communications
For a home business, the first phone line into your home is considered by the IRS as a personal expense. Additional phone lines for business use, including cell phones used for your business, are tax deductible. Internet service provider fees or broadband costs such as high speed cable connections are deductible as a percentage of business use to total usage.
Meals and Entertainment
If you take a client or prospective client out to lunch and talk about your business, it is often tax deductible as a cost of doing business. If you are doing business out of town or at your convenience on a business-related task, you can typically deduct the amount of meals. If you are entertaining a client, the expenses related to the meeting are deductible if they have a business purpose.
Meals and Entertainment is one area that is often abused by small businesses, so if you plan to take deductions for these kinds of expenses, be sure to keep receipts. Also keep records of what the money was used for to avoid any kind of legal entanglements later on. As with most business deductions, as long as you stay within the IRS guidelines for what is allowed and keep good records, you can take this deduction safely.
You can only deduct 50% of the cost of meals and entertainment.
Tax Preparation Expenses
Though not specific to home-based businesses, the expenses that you incur to have your tax return itself prepared may be tax deductible.
Also, if you use tax-preparation software to prepare your own business’ tax returns, the cost of the tax preparation software is possibly deductible.
Software
Software used for business purposes are deductible as a business expense. Note that for software packages in excess of $500 in value, you may need to amortize (write off over a period of time) the software over 3 years. If you have purchased software that costs more than $500 per piece of software, consult the IRS guidelines for software deductions.
Educational Expenses
Educational expenses incurred directly to learn industry-specific skills needed for your business are often tax-deductible. For example, if you purchase the Professional Bookkeeper™ course to learn Accounting and Bookkeeping skills to start your business, this expense is tax deductible as a start up cost once your business is underway.
Record Keeping
Many small businesses let themselves get cheated every year by not taking deductions they are legally entitled to on their taxes for fear of being audited. As long as you stay within the IRS guidelines for what is and is not tax deductible and keep receipts and good records, you are safe to take the deductions you are legally entitled to. The Home Office Deduction in particular is a deduction that many have wrongly assumed makes them a target for an IRS audit.
If ever in doubt, go directly to the source, the IRS themselves. They publish many articles defining exactly what deductions you are entitled to so that you can be sure that you are in compliance with the law.
It may be advisable to consult a tax preparer for specific questions regarding what would or would not be deductible, and to what extent. For a thorough understanding of tax preparation for your own business or to prepare taxes for other businesses or individuals, you may want to look into training such as Universal Accounting®’s Professional Tax Preparer™ program. For many individuals and businesses, they save more on their taxes over a year or two than they spend on the course itself. Plus, they have the assurance that they are doing their taxes correctly and doing proper tax planning to reduce their tax liability.
A Great Home Business
As illustrated above, running a home business gives many tax advantages and deductions. One of the best home-based businesses going is starting your own successful Accounting and Bookkeeping service. You will make between $30 and $60 per hour out of your own home in a relaxed environment. The Professional Bookkeeper™ program teaches you step-by-step how to make a great income helping businesses manage their money.
Home Office Tax Advantages
For more infomation about home-based business advantages: Please look at our Professional Bookkeeper™ Course.
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What Kind Of Tax Advantages Do Home-Based Businesses Enjoy?