How to Become a Bookkeeper

By 360 Coverage Pros

Want to do exciting work with reasonable pay and excellent job security? Then perhaps you should become a bookkeeper.

The practice of bookkeeping goes back over 7,000 years to Mesopotamia. Ancient records recovered from the ruins suggest that people used basic accounting techniques to determine if there was a surplus or shortage after crops were harvested each season.

Bookkeepers perform vital functions for all types and sizes of businesses and organizations. Without bookkeepers, businesses wouldn't know if their revenue is growing, their expenses are escalating, or whether or not they have cash in the bank. It's no wonder bookkeeping has remained one of the most stable and respected professions, despite the many bookkeeping changes throughout the centuries.

Are you interested in becoming a bookkeeper? If you are organized, detail-oriented, enjoy paperwork and working with numbers, bookkeeping might be the perfect career to keep you motivated and secure in your profession. Read on to learn more about the responsibilities of a bookkeeper.

Responsibilities of a Bookkeeper

Although adding machines, calculators, ledgers, and pencils have far less prominence today, bookkeepers still perform the same essential functions, vitally important to every business—tracking income and expenses. As a bookkeeper, you will be responsible for recording all financial transactions and helping businesses manage their cash flow. This could include:

• Entering sales and receipts into a physical ledger or accounting software
• Filing receipts, either physically, electronically or both
• Reconciling expenses, bank statements and other financial records
• Managing payroll, including W2 and 1099 tax forms
• Verifying and paying company invoices, also known as Accounts Payable
• Creating and sending invoices to customers, also known as Accounts Receivable
• Create financial reports

After recording the transactions, an accountant will typically review the bookkeeper's work and make the adjustments needed before submitting the accounts. Some companies, particularly small businesses, may have their bookkeeper prepare city, state and federal tax filings.

Skills of a Bookkeeper

Now that you have a basic introduction to what kinds of things you will do as a bookkeeper, it's essential to understand the basic skills needed to perform those tasks. Believe it or not, you don't need any specific qualifications to become a bookkeeper. And you don't need to be a Certified Public Accountant (CPA) or have an accounting degree to start a bookkeeping career. You will need some particular skills and qualities to help you excel. Here is a list of the most critical skills required to become a successful bookkeeper.

Math – As a bookkeeper, you will use basic math skills every day to verify and enter financial transactions, calculate credits and debits and summarize them to create financial reports.

Problem-Solving – Often, bookkeepers face discrepancies in financial reports and must use problem-solving skills to determine why the numbers don't add up. Usually, that involves a diligent mindset to find errors within the records. Maybe something has been entered twice.  Maybe a number has been transposed. Or possibly, a number from a prior year has been adjusted on one statement but not the other.

Attention to Detail – You must be detail-oriented to oversee multiple financial documents effectively. In bookkeeping, every penny counts, and it's your job to ensure the financial reports are accurate.

Organization – Many bookkeepers work for multiple clients at once. You may be the bookkeeper for a company with several subsidiaries, requiring you to juggle between different accounts, sources of revenue, bank statements and more. The ability to organize financial information across various areas is critical to the role of a bookkeeper.

Integrity – As a bookkeeper, you will be handling the company's lifeblood— its confidential financial reports. You must embody integrity at every level with full transparency to performing the job. Bookkeepers must ensure that financial reports follow all applicable laws and government regulations. Also important is the bookkeeper's responsibility to identify potential fraud and prevent the misuse of funds, which also requires a very high level of integrity, along with a strong sense of responsibility.

Becoming a Bookkeeper

Although bookkeeping opportunities don't require a degree, most employers prefer candidates who complete college coursework in accounting or a related field. Becoming a bookkeeper can take as little as one year, depending on the educational path you choose. Earning an accounting degree or pursuing certifications take more time, but they will help you advance professionally. Here are four educational options for pursuing a bookkeeping profession.

1. Enroll in Bookkeeping Classes. Some bookkeepers pursue job opportunities without a degree; however, many do complete related classes as their job training. You can learn how to manage payroll, track income and expenses, produce financial reports, and basic accounting skills through various bookkeeping classes. Many classes feature specific bookkeeping software programs which prepare you for the basics. You can find bookkeeping classes online through various Community Colleges, Adult Education Facilities, and Colleges and Universities.
2. Complete an Associate's Degree. You can earn an associate's degree in accounting or bookkeeping. Both disciplines provide training in the primary functions required of bookkeepers, including recording financial transactions, managing the general ledger and preparing invoices. Some employers prefer to hire bookkeepers with at least an associate's degree.
3. Pursue a Bachelor's Degree. Earning a bachelor's degree in accounting helps you advance your career and compete for higher-level positions. According to indeed.com, over 80% of bookkeepers working today do not have a bachelor's degree, so this path will help you stand out in the job market. Earning a bachelor's degree typically takes four years, though incoming students with an associate degree can often finish their bachelor's degree in two years. A bachelor's degree in accounting also prepares bookkeepers for additional roles, including accountant and auditor.
4. Bookkeeper Certifications. You can demonstrate your bookkeeping qualifications by pursuing national certifications. Typically, you're provided with a study guide and may be required to enroll in a preparation class. Once you've passed an examination, you receive your certification. You can become certified through local or online college courses and professional associations. Here are the two top professional bookkeeper organizations:
• American Institute of Professional Bookkeepers (AIPB) – To become AIPB-certified, you must pass the four-part national certification exam, plus you must meet the 3,000-hour work experience required.
• National Association of Certified Public Bookkeepers (NACPB) – To earn certification through the NACPB, you must pass an exam and submit proof that you have acquired an Associate's or Bachelor's degree in Accounting.

Work Options as a Bookkeeper

Once you've identified and completed your educational path, you need to decide the right environment for your bookkeeping career. There are two broad options for you to consider.

Work as an Employee – If you work as an employee, you can still work from home and have a certain degree of freedom. The company you work for will assign you tasks, which means you won't need to worry about landing clients and marketing your business. As an employee, you'll be working on the company's terms and have a fixed salary. If you choose this path, you can find bookkeeping job openings through any online job site, such as CareerBuilder, ZipRecruiter, Indeed, Glassdoor and others.

Work as a Freelancer / Set up your Own Company – As a freelancer, you set your prices and have control over your income. Your earning potential is much higher than working as an employee, making it incredibly attractive for many. But keep in mind that as a freelancer, you're responsible for any costs that come with starting this kind of business, such as bookkeeping software and paying your taxes. If you're prepared to be your own boss and don't mind the extra headaches, you will have much higher earning potential, well into the six figures.

To start up your own company, you need a computer, reliable internet, and bookkeeping software. Make sure you have a secure Wi-Fi connection and secure systems in place to protect clients' private financial data. Set up a website and promote your service packages. You can get creative when designing your services and focus on what clients would need from you.

You will also need to decide which business structure to go for. The most common include:

• Sole proprietorship
• Partnership
• Limited liability company (LLC)
• Corporation

If you are a one-person business, you are likely to choose between sole proprietor or LLC, but you should do additional research and seek legal counsel on the best approach for your circumstances.

Earning Potential as a Bookkeeper

Entrepreneur Magazine claims that bookkeeping is the #1 most profitable business you can start from home. Their data suggest that as an entry-level bookkeeper, you can expect to earn anything between $18 to $23 per hour.

According to QuickBooks, if you work as a freelancer, you can earn $69 to $82 per hour once you gain experience.

Becoming a bookkeeper can be an enriching, long-term career path, but there are a few risks for you to understand and consider.

Legal Exposures for Bookkeepers

As a bookkeeper, you handle the lifeblood of the company. Financial statements can be complicated and highly regulated, and you can be sued for professional negligence. A simple mistake, typo or omission can put you at risk, as well as your employer. If you are a freelancer, your risks are even more significant. As a bookkeeper, it will be vital to have professional liability insurance to protect you from these kinds of risks. Professional liability insurance is critical because it:

• Reduces financial worries. It replaces a considerable, unknown risk (the chance of getting sued) with a minor expense (a periodic insurance premium). Most bookkeepers realize that certainty is better than uncertainty when it comes to finances.
• Provides immediate access to a competent defense attorney. If you get sued, you'll need to find an attorney fast. But selecting a good one can be time-consuming and difficult. When you have professional liability insurance, your insurer will provide you with a capable lawyer to quickly launch your defense.
• Lowers stress. Getting sued raises the possibility a judge will levy an extensive settlement or judgment on you. If you don't have liquid assets to cover this amount, you may have to sell off business and personal assets or even declare bankruptcy. Getting sued also raises questions about your professional competence, which often enters the media. When you have insurance, your policy will pay for an attorney to have the claim dismissed or settled out of court, if possible. Doing this will minimize reputation damage. Providing help with both the financial and emotional stress of being sued is a big reason to have professional liability insurance.
• Enhances client trust. Your customers want to know you're a true professional. Being insured is one way to demonstrate this. It shows your clients you will take responsibility for your mistakes and make them whole financially.
• Covers the risks general liability insurance doesn't. Many bookkeepers think general liability insurance or a business owner's policy (BOP) will cover their professional mistakes. They don't; they only cover third-party injuries and property damage, not mistakes made while executing bookkeeping duties. If you want protection against client lawsuits due to claims of bookkeeping negligence, you'll need to buy professional liability insurance.

Having professional liability insurance is essential for all bookkeepers. With a career as demanding and stressful as bookkeeping, you don't need further worries with client litigation. Being fully insured will produce the peace of mind you'll need to prosper in this rewarding field, not just now but for many years to come.

360 Coverage Pros offers a professional liability insurance program that checks all of the above boxes. Our Professional Liability Insurance for Tax Preparers and Bookkeepers features a segment-leading online application that lets you click and bind your coverage to receive instant proof of insurance. To learn more, visit our website.