Overview of Independent Workforce
A large portion of the workforce makes a living through independent work in this era. Though full-time job with one employer has been the norm for decades, there are many people who are enhancing their income as well as shaping their work lives by working independently.
“Independent Work”, also known as “Freelancing” or “Self Employment”, is rapidly evolving. All thanks to digital transformation and several other forces that are fueling the growth of the independent workforce.
Though the concept of independent work is not new, the transition from traditional 9 to 5 job to self employment is due to the many benefits it offers to the independent workforce.
As per a survey report by McKinsey, the primary benefits that it offers include: (i) great degree of autonomy (ii) payment by task or assignment or sales and (iii) short-term relationship between worker and the client.
Furthermore, workers doing independent work by choice and not out of necessity are more satisfied than those working in traditional jobs. Such a finding holds true across countries, age groups, income levels, and education.
Thus, independent workers are found in all occupations and industries. As per the survey, independent work is preferred by many professionals such as doctors, therapists, lawyers, accountants, interior designers, and writers.
Economic Benefits From Independent Workforce
Hence, we can say that independent work has an immense potential in the years to come. Such a shift could have real economic benefits in the form of: (i) increased labor participation (ii) increased consumption (iii) opportunities for the unemployed and (iv) increased productivity.
This article caters to the freelance accountants who are already engaged or wish to engage in independent work. It is a complete guide for those self accountants who are working independently either full time or part time in order to supplement their primary income.
This guide gives you insights on how to become a self employed accountant. It covers all the aspects, right from becoming a CA, registering with ICAI to purchasing tools like a cloud accounting software to ease your work.
Tips To Becoming A Self Employed Accountant
1. Qualify As A Chartered Accountant
In order to become an independent accountant in India, it is important for a person to pursue Chartered Accountancy course. The Institute of Chartered Accountants of India (ICAI) regulates and conducts the examinations as well as offers study material for the candidates pursuing Chartered Accountancy Course in India.
Thus, a candidate needs to register with the Board of Studies (BoS) after qualifying their 10+2 Examinations in order to start with the CA course. There are various levels of examinations as well as practical training that a candidate needs to undertake in order to pursue CA Course.
For a complete guide on how to become a Chartered Accountant, check our article on “How To Start An Accounting Firm in India?”
2. Register With ICAI
After qualifying the CA Course, it is mandatory for a Chartered Accountant to register with ICAI in order to start his practice. You can register with the Institute either as an Associate Member or as a Fellow Member.
The application for registration should be made to the Council in a prescribed Form. Furthermore, the accountant needs to pay an annual membership fee as stipulated by the Council of ICAI.
Thus, once registered with ICAI, the accountant can use the letters A.C.A after his name in case he is an Associate Member of the Institute. However, if he is a Fellow Member of the Institute, the accountant can use the letters F.C.A after his name.
This gives credibility to a Chartered Accountant while pursuing his practice.
3. Get Certificate of Practice
No member of ICAI is entitled to practice as a Chartered Accountant unless he has obtained a certificate of practice from the Council. Thus, to start practicing as a CA, it is mandatory for an individual accountant to obtain Certificate of Practice.
In order to obtain this certificate, the accountant needs to make an application to the Council in a prescribed Form. Also, such an accountant needs to pay an annual fee for Certificate of Practice to the Council.
4. Take A GST Number
As per section 22 of the CGST Act, 2017, the minimum threshold turnover for GST Registration is Rs 40 Lakhs for goods and Rs 20 Lakhs for services .
This means that if your annual aggregate turnover as a personal accountant is more than Rs 20 Lakhs, you are liable for registration under the Act. However, new freelance accountants or accountants having an annual aggregate turnover of less than Rs 20 Lakhs need not register under GST.
To know the complete procedure for registering under GST, you can refer our Ultimate Guide on GST Registration.
5. Find Your Niche
Generally, accounting is viewed as a one-size-fits-all service that caters to businesses working in different markets, industries, trade and locations.
The challenge that underlies such an approach is that accounting firms end up giving too many services and do not specialize in a specific area.
This hampers the quality of services rendered by the accountants. Consequently, they fail to provide a strong advisory support in a specific area or field due to limited knowledge and experience.
Also, it is quite irrational to provide general accounting services to businesses working in different markets, industries, trade and locations. This is because businesses would prefer domain experts over generic accountants.
Hence this would mean loss of opportunities for accounts offering general accounting services.
Thus, it is advisable for independent accountants to choose their niche area of practice.
How To Choose Your Niche?
Choosing niche area would help accountants to promote themselves as experts and find prospects in a relatively easy way.
This is because it becomes easier for online users to come across the profiles of chartered accountants who make use of keywords pertaining to their domain. Thus, accountants using such specific keywords appear on top of search results.
But finding a niche is not that easy. It requires a lot of self questioning and self evaluation. To begin with, you can ask the following set of questions to yourself as well as your team members:
- What you are good at?
- Who are your regular clients?
- What’s your background?
- What’s happening around you?
After listing down the possible answers to all the above questions, you can list criteria in order to filter out the top five answers for each of the questions.
Finally, you can sort out the segments having the highest scores in the criteria chosen for each of the segments.
To widen your options, you can also choose the segments scoring the second highest, depending upon other factors like your area of expertise.
6. Decide The Pricing of Your Services
Pricing services is the most important decision for an independent accountant.
It is quite challenging for freelance accountants to demand a right price for their services. This is because the freelance accountants are yet to begin their accounting practice and have limited experience.
To set a price for the accounting services that you render, you have to consider a host of factors like:
- the certifications you have earned,
- your work experience,
- type of services that you offer,
- length of period for which you offer services to a client,
- the cost of license for an accounting software if any etc.
Now, you can calculate the price using hourly or flat rate system. This happens once you are clear with the nature of services to be offered and the time involved in rendering those services.
Hourly Rate System of Pricing
If you are a beginner, you must use an hourly rate system in order to calculate the price of your accounting services. This is because as a beginner, you don’t know how much would be spent in delivering specific services.
Under this system of pricing, the price you demand from your customers is based on the number of hours you take to complete the project.
Value Based Pricing
If you are an experienced accountant or an accountant who offers recurring services to its clients, you must use a flat rate system or value based pricing to price services.
Thus, in this strategy, you are able to set prices based on your customer’s perception of the benefits of your product or service.
This method takes into account the value your customers attach to the benefits they derive against the price they are willing to pay for your product or service.
7. Find A Work Space
You can start practicing as an accountant from your home in case you do not want to invest in an office space.
However, to work professionally, you can consider co-working spaces that are relatively cheap as compared to the traditional office spaces.
The co-working spaces offer a complete package of amenities. This includes:
- excellent infrastructure like individual desks or cabins, high-speed internet, meeting rooms, tea or coffee, stationery, printing etc and
- flexible leasing options at a predetermined price.
Apart from all these facilities, it offers great networking opportunities. This is because the incumbent office owners get the convenience to interact and engage with each other casually.
There are a host of co-working options currently in practice in India for you to choose from. These include Cowork, BHive, AwFis, Regus, 9 SpringBoard, Ikeva, Mumbai Coworking, IShareSpace etc.
8. Purchase A Cloud Accounting Software
To streamline the accounting processes of your clients and save time, Chartered Accountants must invest in a Cloud Accounting Software.
Cloud Accounting Software is an internet based accounting software that runs in the cloud. Thus, cloud accounting software runs on someone else’s servers rather than on your own computer.
This eliminates the need to buy software on discs and a computer with a big hard drive to run the program. Further, it offers a host of features that traditional accounting software fails to render.
For instance, accountants can access the financial statements of their clients anytime, anywhere through any of the mobile devices. All they need is an internet connection.
Further, the cloud accounting software makes collaboration with clients as well as employees extremely easy. The accountants can add multiple users and share information easily with them.
Also, the accountants can manage the bills, invoices and accounting information of all of their clients all at one place.
So, to work smarter and grow your practice as a Chartered Accountant, you can purchase license of QuickBooks Online Accountant.
QuickBooks is one of the leading cloud accounting software that caters to the needs of accountants in a dedicated way. It offers a host of features for accountants including:
- real-time document exchange,
- automatic bank updates,
- anytime anywhere access,
- facility to add multiple users and much more.
To know more about the features offered by QuickBooks For Accountants, click here.
9. Open A Business Bank Account
Before starting your accounting practice, you certainly need to have a current account with a bank.
Current account, also termed as zero account, is an account used to facilitate current day-to-day banking transactions. It’s non-interest bearing account which means bank will not pay any interest on the amount deposited.
Thus, these types of accounts are meant for firms, companies and businessmen having higher number of transactions on a regular basis.
Such an account does not put a limit on the number of transactions that can be made. Furthermore, there are a host of other benefits offered to the account holders like:
- limitless withdrawals
- facility to handle large volumes of receipts and payments,
- no restrictions on the deposits made at the home branch
- facility to overdraw
- facilities like internet banking and mobile banking
- provision to issue cheques, pay-orders, demand drafts
These are the features offered to the account holders in general. However, different banks offer a wide range of current account products depending upon the specific banking needs of the firms and business owners.
Some of the banks offering the best personalized services in case of current accounts in India include: ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra and Yes Bank.
These banks offer customized current account products. You can choose the one that best suits your banking needs.
10. Get Clients Through Referrals or Other Sources
To get initial projects as a freelance accountant, you can take the help of your seniors or other members of ICAI. Besides this, you can even attend the seminars or conferences organized by the Institute and interact with experts and other invitees to build contacts.
Furthermore, you can also deliver a lecture at such seminars as these are great platforms to showcase your specialized knowledge and gain visibility amongst other experts. Such a visibility can help you in getting professional opportunities in the long run.
Also, you can create profiles on social media platforms like LinkedIn to connect with professionals and other experts. Sharing valuable information with the network
In addition to this, you can even aim at becoming an affiliate of the Networks of the Accounting Firms approved by ICAI.
But being a part of such networks is a long term game for independent accountants beginning to start their accounting practice. This is because to be a part of such a network requires experience and reputation on the part of the accountants.
11. Sell Service Bundles
Packaging your accounting services into a service bundle can be a great way to stand out from other freelance accountants. Bundling is simply offering a package of deals to up sell your products or services.
So, as an independent accountant, packaging your accounting and bookkeeping services would enable you to standardize your service offerings.
Additionally, you would be able to provide clients what they want by segregating compliance work from advisory services.
12. Get A CA Loan
To cater to all your professional needs, there are a host of CA loans offered by various banks and financial institutions.
A CA loan is nothing but a type of a professional loan. Such a loan is customized for chartered accountants keeping their professional needs into consideration.
These can be availed by practicing or professional chartered accountants to meet their business or professional needs. Such loans can be taken for business expansion, buying office premises, purchasing equipment, meeting working capital requirements etc.
These loans are offered in the form of ‘Professional Loans’ or ‘Business Loans that cover Professionals’.
Professional Loans for chartered accountants provide benefits of: (i) immediate fund availability, (ii) online fund management, (iii) flexible loan facility allowing you to pay interest only on the utilized loan amount, (iv) no collateral etc.
However, you must consider the eligibility criteria and terms and conditions before choosing a particular loan option. Compare the loan offers from different banks on the basis of the interest rates, tenure, prepayment charges, processing fees etc.