Bookkeeping – To all intents and purposes, bookkeeping for sole traders is basic record keeping. You don’t need to use a computer software package such as Sage or Quickbooks, an Excel spreadsheet or a cash book is sufficient. You don’t even need to use an accountant or bookkeeper.
I know, it sounds like I’m doing myself out of work and, yes, in a way I am but why pay someone to do something that you can do yourself? Especially when you are starting out and don’t have the spare cash-flow to spend on someone to do it for you. Saying that though, there are times when having an accountant is preferable or even essential.
Anyway, back to record keeping, you need to keep record of all money spent by you solely for your business as well as all money paid to you by clients for products or services provided. How often you keep a record is up to you. If you don’t have many transactions then you may be able to get away with once a week or even once a month. If you have a lot of transactions you may need to record them daily. If you get to this stage though it may be worth getting someone in to do it for you so that you don’t spend valuable working or personal time keeping it up to date.
As I said at the beginning, you don’t need to use an accounts programme to keep records. You can use a cash book, as long as you write down all the details of money which comes in and goes out of your business. If you do not use an accountant and do not need to produce a full set of accounts to send to Companies House then this is sufficient. However, you will need to submit your tax return to HMRC and you may need to show a breakdown of your expenses, depending on your level of turnover. With this in mind, it is worth splitting the information out as you put the information in your books rather than try to work it out at the end of the year when you are under pressure to submit your tax return. With this in mind, I used to use an Excel spreadsheet and have different sheets for income, expenses, an overview of the different categories and a running profit/loss. I also calculated an amount to be put into a separate savings account for any tax which would be due for that year. The categories on the Self Assessment tax return are:
*Cost of goods bought for re-sale or goods used
*Car, van and travel expenses after private use proportion
*Wages, salaries and other staff costs
*Rents, rates, power and insurance costs
*Repairs and renewals of property and equipment
*Accountancy, legal and other professional fees
*Interest and bank and credit card charges
*Telephone, fax, stationery and other office costs
*Other allowable business expenses
You may find that you have expenses that don’t fit into a particular category such as membership to professional bodies or trade magazine subscriptions, they could go into professional fees or other allowable business expenses, it doesn’t really matter too much as long as they are on there.
Please remember that I am an administrator who specialises in bookkeeping and this blog is not intended to tell you how to keep your records or how to fill in your Self Assessment tax return but give you a broad overview of what you need to do and what I find works for me, and my clients. The HMRC run a number of free workshops throughout the year for individuals who are new to self employment or who wish to learn more about what is expected of them. Information of the courses can be found on the HMRC website.
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