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Keeping up with your books

Emily Coltman ACA, Chief Accountant to FreeAgent – who provide an award-winning online accounting system for small businesses and freelancers – gives her top tips on how to ensure you don’t neglect your books.
When you’re freelancing, it’s tempting to concentrate on the more exciting parts of being in business for yourself rather than the tedious bits.
Perhaps you’re like developing relationships with new customers, or working on marketing your business better. Maybe you prefer to concentrate on developing new services or products. Whatever the case, it’s important that you also need to ensure you don’t put the less interesting bits – such as your accounts and record keeping – at the bottom of your to-do list.
Plan ahead
Even if you’re an established freelancer, it’s important that you are thoroughly prepared for the road ahead. Without a good financial plan in place, you may face issues in the future.

If you don’t already have one in place, draw up a simple financial forecast for your business and be conservative with your estimates. There’s no point in forecasting a huge wave of profit in the next 12 months unless you know you’re actually going to achieve it. And work out some simple ratios such as your break even point – which is the point at which your costs and your revenue are equal – in order to help you make decisions about where your business needs to go next.

Look online for a forecasting tool – such as Float – that can help you with this sort of business planning. It may be easier than trying to do it from scratch yourself.

Use a good record-keeping tool

It can be a nightmare trying to keep track of the money you’re spending for your business and how much you’re actually making. Many start-up owners end up cramming receipts into a shoebox and forgetting about them until it’s time to do their tax return – which just creates a mess.

The good news is that you don’t have to do it this way. If you’re using an online accounting system such as FreeAgent, you’ll be able to automate your bank data directly into your accounts – and you could also use an app like Receipt Bank (use code 1x9zggr and you’ll get a 10% discount) that allows you to scan your out-of-pocket expenses straight into your accounts as well.

And even if you’re on a shoestring during the early days of your business, there are a number of free mobile phone apps – such as Earnest – which allow you to input your data and have an at-a-glance overview of how your business is performing and how much tax you owe.

It’s a lot easier than wrestling with a spreadsheet!

Update your books regularly

It’s vital that you make sure you keep your books up-to-date so that you know what’s going on with your business’s cash flow – and see whether you are setting the right price for your services.

However, how often you’ll need to update your books depends on how many transactions your business has. It might be once a week, or once a month, but you should make sure you do it regularly; otherwise the financial information you have about your business will quickly become dated.

And if you find that you really don’t have time to keep your books, don’t leave them undone – hire a bookkeeper to do it all for you.

Claim all your expenses

In the hustle and bustle of daily business life, doing “the books” often slips further and further down the priority list.

That can mean receipts for business costs that you’ve paid for personally get mislaid and never find their way into your business accounts.

Not only does that leave you out of pocket because your business won’t then pay you back for those costs, it also means your business will pay too much tax because you won’t be able to claim relief on those expenses. Two very good reasons to make sure you do include all your expenses.

If you’re struggling to keep track of your receipts, consider making use of a tool such as ReceiptBank, Plendi or MobileAgent to help you record your expenses quickly using your mobile phone.

Stay on top of your tax

No-one looks forward to paying the taxman, but if you don’t keep track of all your income and outgoings you may end up paying too much tax. And if you don’t maintain good records, you might not be able to submit your VAT or tax return on time which could lead to you incurring penalties from HMRC.

Ensure you keep the correct information that you need for your tax commitments and make sure you know all of the relevant dates for submitting your tax or VAT returns. And make sure to check HMRC’s website for any additional information you may need about your tax responsibilities.

Keep an eye on your invoices

Once you’ve completed some work for a customer and issued them with an invoice, it’s tempting to just move onto your next project. But remember that, until you’ve received payment for the work you’ve done, the sale is not complete.

Don’t be afraid to chase up late or non-payments from your customers – after all, it’s your business that suffers if you don’t get paid on time. It could be that some of your customers are having cash flow difficulties and aren’t able to keep to your terms – but you won’t know this until you chase up your invoice.

You should also consider implementing a system that sends out automatic invoice reminders if you don’t feel you have the time to do this yourself.

Above all
It’s important to not be overawed by your business accounts. Remember that good financial management is the foundations for a successful business – so don’t put your books on the backburner!

Emily Coltman ACA is Chief Accountant to FreeAgent, who provide an award-winning online accounting system designed to meet the needs of small businesses and freelancers. Try it for free and if you sign up using this link, they’ll give you a 10% discount.

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