According to estimation, there are currently approximately 1,160 bookkeeping firms of Israel. In addition, some tax consultants and accountants also supply bookkeeping services.
- The industry is very competitive and characterized by an abundance of small and independent businesses.
- Communication between a bookkeeping firm and their customers is usually long-term. Bookkeeping services are not usually replaced unless services rendered are not satisfactory.
Customers: Defining the Target Market and its Size, Market segmenting
All businesses and companies in Israel require bookkeeping services; they can be segmented according to the size, extent, and legal requirements of the business.
- A company is required by law to manage a bilateral bookkeeping system, and present reports signed by an accountant.
- Legal requirements are not as strict for self-employed persons and businesses not registered as a company; these may manage their accounts independently with no professional assistance. This sector constitutes the potential target market for bookkeeping services.
- Accountant and tax consultant firms requiring independent bookkeeping firms to serve as sub-contractors.
Competition in the industry may be divided into two main groups:
- Bookkeeping firms supplying only bookkeeping services.
- Accountant or tax consultant firms, who also provide bookkeeping services for their customers.
Most of the firm’s activity usually stems from recommendations and referrals from customers or accountant firms that do not have bookkeeping services. Marketing activities usually focus in Yellow Page ads or advertisement in local press, in addition to conducting direct marketing activities.
Future Development Options:
The decrease bookkeeping software prices, alongside the development of basic, simple software (including internet-based software) has led many businesses to use internal bookkeeping, with no assistance from external services. Notwithstanding, many business owners prefer to avoid the hassle and the time required to manage bookkeeping and they do prefer contracting this work to an external firm, even if financial price is higher.
Factors Affecting Success:
The main factor affecting success is the firm’s ability to develop a repository of regular customers within a short time. These customers may have direct communication with the firm, or be contracted for long-term communication with an accountant or tax consultant firm.
Limitations on Entering the Industry:
Financial barriers are relatively low- an initial investment in furniture, a computer, along with bookkeeping and wage management software. In many cases, the business can initially be operated from home. As practicing in this trade requires a professional certification, the main barrier is the licensing process.
A small bookkeeping firm usually employs 3-4 bookkeepers of different training levels in addition to administrative support. There are a number of bookkeeping levels:
- Type 1 and type 2 provide basic professional training
- Type 3 provides in depth, professional training and training in the science of trade.
- Certified bookkeeper- highest training level.
Required equipment includes office furniture and accessories according to the office’s size, computer equipment and professional bookkeeping software.
When calculating the required investment, the following expenses should be considered:
- Furniture and air conditioning.
- Photocopier- it is possible to rent a machine, with payment conducted according to usage.
- Telephony system and fax.
- Computers and professional software.
- Forms, paperwork, and office supplies.
Industry Revenue and Profitability
Revenue of a bookkeeping firm can be calculated according to the number of accounts managed and the extent of each account. Price per account is based on the expected number of transactions, according to the firm’s evaluation; this includes invoices, vendors, bank transactions, and checks.
Typical Terms of Payment
Terms of payment in the industry are relatively relaxed for the firm- customer is usually billed monthly or bi-monthly, at credit terms of up to 30 days.
Risk level for a new entrepreneur initiating a bookkeeping firm is not high. The main risk is in the alternative price paid for the learning process and initial stages of acquiring new customers.
Licenses and Certifications:
- In order to practice in the business, a professional certification from the Ministry of Labor and Welfare is required; this certification is awarded to those who pass certification exams, according to type: 1-2, 3, or certified.
- A business running an office in a tenant apartment local authority permit for deviant usage is required.
Business insurance (for content and inventory), third party insurance, employer’s liability insurance, professional liability insurance, and loss of income insurance. In addition to the above, an insurance agent should be consulted in regards to the need for additional insurance.