“Don't ever let your business get ahead of the financial side of your business. Accounting, accounting, accounting. Know your numbers.” - Tilman J. Fertitta

When you’re a sole trader, billing, invoices, and accounting are things you have to do that mightn’t come to you naturally. Small businesses and freelancers often have fewer accounting challenges than larger businesses, of course, but it all still needs managing and by fewer people.

The average freelancer in the UK earns around £29k a year. Of course, people can freelance in almost anything so these figures aren’t mightn’t be accurate for certain lines of work.

Are you feeling lost when it comes to bank accounts, loans, VAT, or accounting?

Don’t panic! This is quite normal, especially when you’re first starting. If you still aren’t sure what to do, here’s some advice.

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Which Are the Best Accounting Programs for Sole-traders?

Accounting is a tricky part of working for yourself and, in a lot of cases, can be made easier with software.

Which is the best accounting software for freelancers?
You can save a lot of time and money just by doing your accounts using software instead of pen and paper. (Source: TheDigitalWay)

While there’s accounting software for massive companies, there are also programs that sole traders can use effectively to make their accounting much simpler. They can save you time, make things easier, and check that everything’s above board.

When it comes to accounting software, there are a few to consider. Here are a few to get you started:

  • FreshBooks
  • Sage Accounting
  • Clear Books
  • Xero
  • QuickBooks
  • Zoho Books
  • QuickBooks.

Pretty much all of these software solutions can be used to create invoices, manage expenses, track transactions, and automate a lot of different bookkeeping tasks.

Many of them come with a free trial so it's always a good idea for you or your accountant to try out the different solutions before you choose the right one for you and your business.

As you’ll see, accounting software can quickly help small businesses and sole traders to manage their finances, but it doesn’t all need to be done completely digitally.

Check out the best accounting software for sole traders

How Can You Manage Your Accounts as a Sole Trader?

Managing your accounts isn’t always easy, especially if you’re a sole trader or small business known. You need to be organised and prepared and leave nothing to chance as when things go wrong, they can go catastrophically wrong.

How can sole-traders manage their accounts?
If you're doing your accounts, it's a good idea to use software to keep everything in order. (Source: Myriams-Fotos)

Our best advice is to use software to help you manage your accounts. You can use these to input monthly figures, see variances, or do the books. Some options are almost as powerful as having an accountant there with you.

You need to be meticulous when it comes to running your business and doing your accounts. You need to keep a record of almost everything and this includes invoices, receipts, expenses, etc.

You also need to report your earning and accounts for tax purposes. In some cases, it might be a good idea to have a separate account for your business rather than using your current account. This can make separating business expenses from personal ones a little easier.

It’ll also make it easier to provide evidence of business expenses, too. Whether you’re trying to line up transactions with invoices or correlate expenses with receipts, a dedicated account can make this much easier. It can help if your receipts and invoices are organised, too.
Nowadays, you can do this both physically and digitally.

Learn about managing your accounts as a sole trader

What Are the Advantages of Managing Your Accounts as a Sole Trader?

As a sole trader, you can enjoy the benefits of managing your accounts. This gives you more control over how your finances are run and how your business operates.

What are the advantages of doing your own accounts?
By doing your accounts, you'll have a better understanding of your financial situation. (Source: Edar)

The biggest advantage is that you get to choose how you run your accounts. This means that you are in charge of invoicing, expenses, and paying VAT, and can make better decisions as you’re fully abreast of what’s going on. Again, you must keep a record of your invoices, earnings, receipts, and expenses.

Furthermore, you also need to make sure that you make the appropriate tax contributions. There are a few ways to do this so make sure that your contributions are correct and made before the deadlines.

To top it all off, there are ways to get tax breaks, bursaries, and funding, depending on your business. There’s also financial help out there for certain types of activities, so check for industry-specific funding.

Learn how sole traders can do their accounting

What Are Sole-traders’ Financial Responsibilities?

Despite sole traders having quite a few freedoms in terms of how they run their business, there are also several requirements. For many freelancers, these freedoms or why they want to work for themselves.

What are the financial obligations for sole-traders?
Make sure that your records meet all the legal requirements. (Source: 70154)

The first thing that freelancers have to manage is their invoicing. This is a record of how your clients will pay you. There are rules and requirements for what you have to include on your invoices so make sure you follow them to the letter.

You’ll also need to keep your receipts. Generally, they say you should keep a hold of all your receipts for five or six years.

You need a record of your sales and income, business expenses, VAT records if you’re registered for VAT, a PAYE record if you employ people, and records about your personal income.

You’ll also want these records to be organised as you’ll be using them to submit your tax return and work out your profit or loss.

As we mentioned earlier, this can be made easier if you have a separate bank account for your business.

Find out about your legal accounting responsibilities as a sole trader

The rest is now up to you!

If you're interested in learning more about economics, finance, or accounting, consider getting help from one of the many talented and experienced private tutors on Superprof.

You can learn about managing your money and accounting with face-to-face tutorials, online tutoring, or group classes. Each type of tutorial comes with its pros and cons so think carefully about what you're looking for in a tutor, how much you can afford to pay, and how you like to learn.

Face-to-face tutors can offer a bespoke service and teach you whatever you'd like to learn. They tend to charge more than the other types of tutoring since they plan and tailor their lessons to their students and will sometimes have to travel to their students. However, since every minute of each tutorial is spent teaching you, this is arguably the most cost-effective way to learn.

Group tutorials are great for those on a budget. If you're the kind of person who likes learning in a social environment, this type of tutoring could be for you. Since you'll all be sharing the cost of the tutor's time and expertise, these types of lessons tend to work out cheaper per student per hour. Of course, you can't expect the tutor to tailor the lessons just to you, though.

If you can't find any suitable or available tutors in your local area, consider learning with an online tutor. You can look for tutors all over the UK and around the world to teach you via webcam. Of course, if you're learning about accounting, you might want to make sure that they're familiar with the legal requirements in the UK for accounting as you don't want to get any of it wrong.

Fortunately, a lot of the tutors on Superprof offer the first lesson for free. These free lessons are a great opportunity for students to try out several potential private tutors before deciding on which one is right for them.  It's a good idea to outline what you're looking for in a tutor and how much you can afford to pay before you start shortlisting potential tutors and contacting them for private lessons.

You might be spending a lot of time with your private tutor so remember that it's important that they can teach you what you need to learn and that you get on well with them.

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Joseph

Joseph is a French and Spanish to English translator, language enthusiast, and blogger.