Guest Blog from Tracy baker
Email Tracy at email@example.com to arrange for a free review of your bookkeeping needs.
We often choose to become self employed to gain more freedom, more independence – it’s reportedly the top reason for “going it alone”.
So it stands to reason that staying on the right side of the law with duties such as bookkeeping can feel at odds with this freedom, some regard it as a chore. Here are 6 tips to make your bookkeeping a little more liberating.
Tip #1 Keep your personal and business finances separate.
Whilst there is no legal requirement for you to do so it is advisable. Open a separate business bank account and ensure enough funds to meet cashflow. Keeping personal and business separate also makes things easier if you were subject to a tax inspection.
Tip #2 Don’t under report your Income.
It’s tempting we know but brushing small amounts of income under the carpet is tax fraud and HMRC specifically targets smaller businesses for not paying their “fair share” of tax. It’s not worth the risk or stress!
Tip #3 Keep up to date on your bookkeeping entries.
Process invoices and receipts at least once a month including doing a bank reconcilation – ie checking that what is showing on your bank statement is actually what is reflected in your income and expenditure of your accounts. Keeping sales and purchase invoices in chronological order ie would suggest alphabetically then in date order, most recent at the front in something as simple as a concertina file.
Tip #4 Consider cloud accounting software and/or an online bookkeeper.
Consider a hassle free cloud accounting system such as Xero especially if you are online a lot of the time and login from numerous locations. You can access your accounting information from anywhere with an internet connection. Alternatively hire an onlne bookkeeper and let them do all the work for you.
Tip #5 Keep a record of all business expenses
HMRC requires you to keep records of all business expenses that you deduct from your income for at least 5 years. Ensure you’re up to date on all tax-deductible expenses, organise receipts by month for example taking care to staple those fiddly small receipts to an A4 sheet of paper.
Tip #6 Fill out your tax return well before 31st January!
Yes payment is due on or before Jan 31st each year BUT wouldn’t it make far more sense to be prepared so that you know well in advance whether you owe any tax or in fact are due a refund? The sooner you do your tax return the longer you have to prepare and save money aside should you need to and the less impact it will have on your business cashflow.