“How many married couples do you know who met over accounting books in a Starbucks?” - David Schweikert
Whether you’re a small business owner or a sole trader, there are certain obligations you have in terms of your accounts. There are a lot of great things about being self-employed, but there are also downsides like having to manage all your accounts.
You have to keep records of your invoices, expenses, VAT (where applicable), personal income, and PAYE records if you employ people. There are a lot of experts in accounting, but the vast majority of sole traders are amateur accountants.
This is why you have to learn how to handle your finances, send invoices, record expenses, and file taxes. There’s a lot of opportunities for you to get it wrong.
Don’t panic, though. With accounting software and other accounting solution, there are a lot of ways for you to streamline how you do your accounts.
Here are our tips for taking control of your accounts.
Using Software to Manage Your Accounts
Numbers can quickly become your arch enemy if you get them wrong. Smaller businesses and sole traders have the benefit of not having to worry too much about VAT. This can make the job easier, but it’s still not easy.
Sole traders also have quite a few options and freedoms for how they manage their business. However, accounting can also be incredibly frustrating if you’re new to it. Consider making it easier with software.
There are a lot of accounting software solutions that can make accounting for small businesses and sole traders much easier. Here are some of the most reputable:
- Sage Accounting
- Clear Books
- Zoho Books
If you don’t need that much assistance, there are also free software solutions out there. It’s up to you and how you want to run your business.
How to Stay on Top of Your Accounts
It might seem obvious, but you need to meticulous when it comes to your accounting. Good record-keeping will make filing taxes much easier, too. You’ll want to make a habit of good bookkeeping.
The first thing is to automatically keep your receipts and file them. As we mentioned earlier, you have to keep a record of your business expenses. These will be used for submitting your tax return.
Don’t hesitate to get boxes, trays, or folders for your receipts. It’s also a good idea to organise them by date as this can make a given receipt much easier to find.
Be rigorous and make a habit of it so that you’ll never have to worry about missing paperwork. Of course, choose whatever system works best for you.
It’s also a good idea to number your receipts. Simply labelling them with a number can make it easier to line them up with invoices, bank statements, etc. This can save you a lot of time when looking for them.
Keep a Record of Your Sales
In addition to keeping your invoices, there are certain purchases where you may need to keep a more detailed record. Some businesses may be required to keep an inventory or a record of certain items and stock sold.
This can also be useful if you need to keep track of spoilage, theft, or damages, too. Just like with receipts, you might want to keep these in chronological order and label them according to customer, payment method, date, etc.
This is another set of records that will be essential for submitting your tax return. To make sure you’re doing it right, take the time to do your research.
Opening a Business Bank Account or Professional Bank Account
While it’s important to label or number your invoices, you can make things much simpler by having a dedicated bank account for your business.
It’ll help keep things separate from your personal expenses or other sources of income. Most banks will offer accounts for small businesses and sole traders. Usually, these are more affordable than business accounts for larger companies.
The account will also make it easier to find business transactions and expenses, which you also need to keep a record of for your tax returns. It’ll also make it easier to gauge the financial health of your business.
Making Copies and Backups
Like with any other important documentation, it’s always a good idea to have hard and digital copies. You never know what might happen to the originals or even the duplicates.
With certain receipts, it might be impossible to get a replacement if you lose the original. Generally, it’s suggested that you keep receipts for at least 5 or 6 years. It’s better to be safe than sorry.
You don’t want to run the risk of needing a receipt or some documentation and having no copies or backups anywhere.
So what’s the solution?
Technology can be useful and there are services and platforms where you can make digital copies of certain receipts. Cloud storage also means that you can have multiple copies across several devices and stored on a server.
When to Do Your Accounts
It might seem simple, but for a lot of sole traders, accounting is a time-consuming endeavour that gets in the way of their work. This is why it’s a good idea to streamline your accounting.
With decent software, a good system for organising your records, and an eye for detail, you should be able to do your accounting without wasting too much time. It’s also a good idea to set aside time to do your accounts and then you won’t have to worry about multitasking and can focus solely on your accounting. Make sure you’re calm and focused.
As you’ll have understood, accounting is an important and sometimes stressful part of being a sole trader or self-employed. While your work may avoid you many other freedoms, accounting is an unavoidable constraint of working for yourself.
Fortunately, there are a lot of tools and resources you can use to make the whole thing a little less stressful.
Hopefully, this article has shown you a few of them. Now it’s 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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