A Guide to self-employed bookkeeping and Record keeping

Maintaining your own financial records when you’re self employed can be daunting to some. Whether you’re not sure what you are required to record and how, or you just don’t simply have time. Here’s some of our top tips on keeping your own bookkeeping up to date and correct.

Can I do my own bookkeeping?

This is a question that we’re often asked by people who are newly self-employed, and the simple answer is yes. But it’s important to keep your records up to date and accurate. This is to ensure that should HMRC ask any questions or launch a tax investigation, your records have been kept correctly. Many business owners don’t do their own bookkeeping because of lack of knowledge on how to keep accurate records or just a lack of time to keep up to date with them.

How do I do my own bookkeeping?

Doing your own bookkeeping can be easy if you don’t have many transactions (i.e. income and expenditure). However, the more complex your business, the more transactions that go through the business, the harder it can get to keep your own records up to date. Modern bookkeeping and accountancy software can make life a lot easier, with online software and apps available to do your bookkeeping wherever you are.

Some people simply keep their records in a spreadsheet, but nowadays bookkeeping software does so much more for you by helping to you to categorise income and expenditure, making it easier for customers to pay you and sending reminders to customers when invoices remain unpaid. We’d recommend getting online software, like our software Nomisma to keep track of your finances

How do I keep track of income when self-employed?

Keeping track of income, is important to understand and ensure your cash flow is healthy and you have money coming into the business to cover your costs. Again, online software helps with this and can also link to your business bank account for reconciliation to ensure your figures correspond with your bank statement.

Can I outsource my bookkeeping?

Absolutely, and its something we would recommend to self-employed people, especially if you have lots of transactions as keeping your financial figures up to date can be complex. Many self-employed and business owners start off trying to keep their own books, but as the business grows and the day to day becomes busier, many just don’t have the time to keep their figures up to date or it’s easy to make small mistakes that become hard to spot. The worse thing is that you then fall behind with your bookkeeping, and it takes a long time to then get your figures back up to date.

Here at dns accountants, we undertake small business bookkeeping for literally thousands of businesses, our experts will ensure that your figures are kept up to date and are always accurate and that you’re compliant with HMRC requirements, taking all the hassle away from you and giving you peace of mind and better control of your finances.

Here are our top self-employed bookkeeping tips:

Keep self-employed books and records from the day you set up your business

As soon as you start your business, start keeping accurate details, receipts and invoices of costs and any sales you make. Many people incur costs even before they’ve fully set up their business. These can still be deducted from your profits and will reduce your tax bill, so make sure you keep records and paperwork for everything, even before you’ve set up.

Get online accounting software

You can start with a manual bookkeeping system with written and hard copy records or using a spreadsheet. However, this can quite quickly become a very inefficient way to maintain your bookkeeping records. Online accounting and bookkeeping software will not only allow you to keep up to date more easily but also contains useful features and tools, which you and your business will benefit from, such as easy payment, invoice reminders and great reporting. Our advice is get online software early, such as Nomisma to keep you up to date and fully compliant with HMRC.

Start recording everything from day one, keep up to date and make sure you know the dates your accounts, tax, VAT, PAYE, etc are due. Late payments and returns can incur heavy fines and penalties.

Get an accountant early

The cost of an accountant can often put people off getting an accountant early in their self-employment journey. However, accountants can give you a huge amount of advice from the minute you are considering setting up a business or going self-employed. They can advise on company formation, company structure, bookkeeping, allowable expenses, keeping records and tax advice. If you choose an accountant, speak to them about online accounting software as they will be able to recommend packages and it may save you money to use a system they can connect to.

Keep track of business expenses

Generally, you are allowed to claim business expenses that are ‘wholly and exclusively incurred for business’. Keep receipts for all expenses that relate to your business, whether it’s stationery, postage, travel costs. Most online packages have the ability to take pictures of your receipts and upload them on your phone. All these costs can help to minimise your tax bill.

Speak to your accountant about expenses and other costs that can be claimed against your business. For example, if you operate a business from home, you can claim a proportion of your bills against business costs. Your accountant will be able to advise on what is and isn’t allowable but read our blog here for self-employed expenses or download our expenses guide for limited companies.

Have a separate bank account

To keep track of your business finances, it makes sense for you to have a separate bank account. If you’re not running a limited company, this can be another personal current account. However, if you operate as a limited company a separate business bank account is necessary. It will avoid you getting your personal finances mixed up with your business finances and make it easier for you to keep track and do your bookkeeping and for your accountant to help you.

Keep money aside and budget for your tax bill

Your profit is your income, minus costs, and allowable expenses. However, you need to ensure that you don’t spend all this money as you will need to put some aside to pay your tax bill. Putting money aside each month, will avoid a large bill at the end of the year that you cannot pay or any big surprises. This money could be put into a savings account each month to keep it separate from the money in your business. Putting 25-30% aside is a good start but speak to your accountant about how much to put aside, especially as your income begins to grow.

Accurate bookkeeping will be crucial to your self-employed and business future. Ensuring you keep accurate records will also ensure that you stay compliant and avoid costly mistakes or fines. It’s amazing how many people don’t do the above things and take steps themselves to keep on top of their bookkeeping. Don’t get behind or leave everything until the last minute, it’ll inevitably pile up your work and cost you money if you do.

It’s far easier these days to keep accurate records and do your bookkeeping using online accounting software. But if you don’t have the know how or the time, then dns can help you with your small business bookkeeping and advise you on things like allowable expenses, tax and bookkeeping generally. Contact us today for help and advice - call us: Tel: 0330 602481 or email us at: enquiry@dnsaccountants.co.uk

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.