Bookkeepers, also called bookkeeping clerks, are tasked with, in essence, “keeping the books.” This means being responsible for the general ledger and keeping track of income and expenses. Depending on the size of the business, bookkeepers may be involved in managing payroll, preparing invoices, producing financial statements and reports, maintaining the annual budget, or reconciling accounts. While bookkeepers share some similar responsibilities with accountants, bookkeeping is focused much more on transactional data and straightforward analysis.

Given the duties of bookkeepers, they are privy to a host of confidential and sensitive financial records and information. Their work in maintaining the general ledger is key to a business’s accurate financial reporting. Because of the importance and sensitive nature of their work, bookkeeping businesses may be exposed to a variety of risks and liabilities. One small mistake can lead to an unhappy customer who may blame your business and take you to court for damages. It is best for anyone involved in the financial services industry to seek proper safeguards and protection from financial liabilities. For bookkeepers, this is particularly important.

The right insurance coverages can help protect your bookkeeping business from not only the everyday risks of doing business, but also specific risks that bookkeepers may be more susceptible too. It may be a dissatisfied customer who faults your business for financial errors or poor guidance, or it could be an employee of yours who unwittingly gets hacked and exposes a trove of confidential customer information—these scenarios could end up financially crippling your business without the proper insurance policies in place. As a business owner, it’s up to you to make sure that you’ve sufficiently prepared for any worst-case scenario.

You should consider purchasing business insurance for your bookkeeping business if:

• You would like to insure your services and practice against claims of poor performance or errors in your work
• You store customer data like social security numbers of financial statements
• You employ others and provide benefits like health or life insurance
• You lease or own your own office building
• You store valuable equipment or property in your office
• Customers or clients visit your office

What insurance coverage do I need as a bookkeeper?

Below we’ve highlighted some of the most important business insurance coverages boookkeepers should pay attention to, along with a few examples of how these coverages would be applicable to your business.

Professional Liability Insurance

As a bookkeeper, you may, at times, be faced with customers who are unhappy with the work you’ve done for them. They may accuse you of errors in your work or of poor guidance, which ultimately could lead to lawsuits against your business. Professional Liability Insurance, also known as Errors & Omissions Insurance, can protect you from liability created in the performance of your professional duties. If a client perceives that your business has injured them or caused financial losses through your mistakes or negligence, they may sue you and your business, and professional liability insurance can help pay for damages and legal fees. This type of professional liability is usually excluded from a general liability insurance policy.

Examples:

• Errors/Negligence: Your bookkeeping business firm is hired to keep the general ledger for a small technology company. One of your employees makes an error and accidentally overstates cash reserves. The company, thinking it has the cash reserves necessary, overextends its credit line. When bills comes due, the company is unable to pay and is charged penalties and fees from the bank. The company then sues your firm for damages.
• Lawsuits without merit: Your firm has been hired to be the bookkeeper on record for a small health care organization. While taking stock of the organization’s historical bookkeeping records, you discover that the company has been misreporting revenues for the last three years. You strongly suggest the organization restate their historical financial reporting, but they do not follow your recommendation. Eventually, the organization is sued by its shareholders for misrepresenting its financials. Your business is sued as well, because the shareholders believe the bookkeeper on record should share some responsibility.

Commercial General Liability Insurance

For almost any type of business, purchasing General Liability Insurance is the first step to providing basic liability protections for your business. If your bookkeeping business or one of your employees injures a third-party in the course of business, liability insurance can help protect your business against the financial consequences of lawsuits. Third-parties include anyone who is not an employee of your business, such as a vendor, customer, or landlord. General liability insurance covers claims from physical injuries or property damage caused by your business. It also covers non-physical injuries such as libel, slander, copyright infringement, or false advertising.

Examples:

• Property Damage: A toaster fire that starts in your office’s break room spreads to the adjacent building and damages that business’s offices and equipment. Your general liability insurance would cover damage to your neighbor’s property.
• Bodily Injury: Your office is undergoing renovations. A customer visits your office for a meeting, and he trips over construction materials that were left out. The customer injures his hip, requiring medical treatment. He sues your business to cover his medical fees.
• Personal and Advertising Injury: Your marketing team updates the company logo but mistakenly creates a logo similar to another financial services firm. Your company is sued for copyright infringement.

Commercial Property Insurance

Commercial Property Insurance will cover you if property that you use in your bookkeeping business is damaged or lost due to accidents or disasters. This type of insurance covers property such as buildings, equipment, inventory, furniture, tools, and computers. Common covered causes of loss include fire, wind, hail, and vandalism. In some policies, theft is also covered, but even when theft is covered, employee theft is usually excluded.

Examples:

• Buildings: An underground gas pipe explodes near your office, damaging the outside wall and foundation of your building. 
• Contents: An overloaded power strip in the office catches on fire and damages valuable computer equipment.
• Property of Others: The $15,000 espresso machine you’ve leased is damaged during a fire that starts in the office kitchen. 

Additional Coverages

• A common insurance policy bundle offered to eligible small and medium-sized businesses is called a Business Owner’s Policy or BOP. This type of policy usually bundles together general liability, property insurance, and business income insurance into a single policy. The pricing on a BOP can often be lower than purchasing the insurance policies separately.
• Workers’ Compensation Insurance covers wages and medical expenses for your employees who are injured while on the job. If an injured employee decides to accept these monetary benefits, he or she agrees not to sue your business. Workers’ Comp is required in many states.
  • Example: One of your employees injures his back when he is moving a heavy box of financial records. Workers’ compensation covers his medical and physical therapy costs.
• Cyber Liability Insurance protects your bookkeeping business from financial losses due to data breaches, hacking, viruses, and other similar cyber events.
  • Example: A cyber criminal hacks into your company server, stealing the financial records on a number of high-profile clients.
• Many businesses are susceptible to employee lawsuits claiming wrongful treatment, particularly small businesses that lack the proper employee training or guidelines. Employment Practices Liability Insurance provides financial protection for your business against employment claims of wrongful treatment such as discrimination, harassment, or other employment-related issues.
  • Example: An employee files a lawsuit against your company claiming upper management fostered a sexually discriminatory and hostile work environment. 

Conclusion

No matter how careful you are in your everyday business, unexpected and unfortunate events can and do happen. From freak accidents to natural disasters, there are some things that you just don’t have any control of as a business owner. Even with things you do believe you have control over, like the quality and consistency of your professional work, mistakes do happen. With a sensitive profession like bookkeeping, one mistake has the potential to cause serious financial damage—for both you and your client.

One thing that you can control is your preparedness as a company. Finding the right insurance coverages for your bookkeeping business can mean the difference between success and failure. Take the time to research exactly what protections you need, and take action in setting up the appropriate financial safeguards for both our company and your employees.