Bookkeeping for self-employed is tough! If you are running your own business and want to keep track of your finances, then you will need some form of bookkeeping. This means keeping track of all of your income and expenses, if you don’t have proper bookkeeping then you are at risk of not knowing if you are in profit or not.
You can also run into tax issues if you don’t know how much you are spending, how much you owe or how much you making. You might find yourself spending money that you don’t have or not being able to pay the tax that you are owed. Having a professional accountant give advice on these areas can be the difference between your business succeeding or not. Clayton Stirling has been an accountant in Gravesend for over 25 years helping businesses of all kinds, get in touch today.
Self-Employed: What to keep track of
If you’re self-employed, it’s important to keep track of what you spend and make sure that everything is as it should be.
Invoices are the lifeblood of many businesses. They’re also a key part of bookkeeping for self-employed people (who is often referred to as “sole traders”). As a sole trader, you’ll need to keep track of:
- All the invoices and bills which come into your business so that you can record them correctly in your accounts
- How much money they bring in – this will help with forecasting future sales
Visit the HMRC website to find out more about being self-employed.
Keep track of all business income and expenses
Keeping track of business income and expenses is important for many reasons. For example, it’s your best way to:
- Keep track of your financial situation
- Provide accurate reports to your clients and customers
- Keep a record of all spending
But how do you keep good records? There are several ways, but here are three main ones: keep digital records on a computer or phone; use cloud storage services like Dropbox or Google Drive; or get an accountant to help you out.
What type of income and expenses should you be keeping track of:
- Income from customers
- Money in from grants and loads
- Petrol or diesel from travel
- Software subscriptions
- Equipment bought for your business
- If you are a food or drink business, waste.
- Paying freelancers or paying employees
- Stationary
- Advertising and marketing
- Office costs, if you work from home you still need to pay for electricity, internet and equipment
- Any kind of training
It’s important to keep track of these areas because these can all be taxed.
Use accounting software to keep their bookkeeping up-to-date.
You can use accounting software to keep your bookkeeping up-to-date. It’s convenient, and affordable and can help save you time and money. Accounting software is also stress-free as it enables you to keep track of all your business finances in one place. Software like Quickbooks and Xero allows you to easily connect to your bank account so that you pick what’s a business expense or a personal spend. You can set rules so it’s done automatically as well as send invoices. Accounting software basically lets you do all of your bookkeeping automatically.
You can hire an accountant or do the bookkeeping yourself.
If you want to save money and have time on your side, you could consider hiring a bookkeeper or accountant to help you keep track of your business transactions. Clayton Stirling is a professional accountant with over 25 years of experience helping businesses with their tax returns, from small to large businesses all around Kent.
Hiring an accountant will allow you to concentrate on other aspects of running your business and avoid making mistakes when entering figures into the system. If this is something that appeals, there are plenty of companies offering services at reasonable rates.
Some other things you need to keep track of include:
- Income and expenses
- Capital expenditure
- Stock (what you have, how much, and the value)
- Costs of equipment
Budget for tax: Accountants in Gravesend
Budgeting for tax is important. If you don’t keep track of your finances and pay your taxes on time, the HMRC will not look kindly upon you and may be forced to collect their dues from your assets or wages.
To calculate how much tax you should pay in a given year, first add up all of the income that comes into your bank account during that period. Next, subtract any expenses that were paid out from this total amount (such as paying a contractor for building work). The resulting figure is your gross profit: what was made from selling goods or services minus costs such as salaries or rent.
The next step is to deduct various allowances from this figure so that only net profit remains: for example, if someone hires an accountant who charges £10 per hour but only works five hours over the course of six months (to provide one monthly report), then they would have spent £50 on accounting services but only recorded two hours’ worth (£10 x 2 = £20). This means they can claim 20% (£20 / 100) towards their taxable income during those six months – which reduces their overall bill by £4 per month!
A general rule of thumb that we tend to advise is to put away 20% of all of your income so that when you have to pay your tax return you don’t have a big surprise.
Conclusion – Bookkeeping for self-employed
Bookkeeping is an important part of running a business. When you’re self-employed, it’s especially important to keep track of all the money coming into and going out of your business. You need to know how much profit you made during the year so that when tax time comes around at least some of this information will already be prepared for you – which means less work! We hope this article has helped explain what bookkeeping is, why it’s so important for businesses like yours as well as how other similar businesses can benefit from our services at Clayton Stirling, get in touch now if you want to find out more.
