organisation of paperwork etc
Discussion
I am starting a small online business that I run in my spare time and I am very nervous about keeping accurate records that will be good when declaring tax etc. I'm a designer by day and dont have really any experience with spreadsheets and formulas etc and the nitty gritty of running a business, so am learning as I go 
Are there any good programs that can help me keep organised, and are good for logging invoices and sales and anything else I should be recording?
Are there any good programs that can help me keep organised, and are good for logging invoices and sales and anything else I should be recording?
I would strongly advise that you get in touch with an accountant as early as possible. There are a number of tax considerations that you need to deal with fairly early on in your career as a trader. An accountant will advise you on what these legal obligations are and how you need to go about fulfilling them.
Also, an accountant should be able to put you straight on the most suitable methods of retaining, filing and writing up your business records - which is important to do correctly from the off.
He/she could also assess what the most suitable recording system is for your business activity - e.g. whether s simple spreadsheet package (like Excel) or a dedicated book-keeping system (like Sage or Quickbooks)is more appropriate - or indeed if manually written up records would suffice (computers are not obligatory).
Also, an accountant should be able to put you straight on the most suitable methods of retaining, filing and writing up your business records - which is important to do correctly from the off.
He/she could also assess what the most suitable recording system is for your business activity - e.g. whether s simple spreadsheet package (like Excel) or a dedicated book-keeping system (like Sage or Quickbooks)is more appropriate - or indeed if manually written up records would suffice (computers are not obligatory).
Edited by Eric Mc on Thursday 22 February 13:40
batfink said:
i have a number of friends who are accountants so i'm ok on that front. Should I be going to them first?
Consider whether or not you want one of your friends to know all your intimate financial details...and if you're happy with that, and are sure your friendship will not get in the way of a business relationship then yes, go to them first. And make sure your friend(s) realise that it is a business relationship, not just a bit of help for a mate...
It's not just the billing process - it's the ability to advise and instruct from a clearly independent point of view.
Make sure that all the proper procedures are put in place -
letter of engagement setting out clearly what she and you are responsible for
that the accountant is a qualified member of a recognised accounting body
holds appropriate professional indemnity insurance.
Make sure that all the proper procedures are put in place -
letter of engagement setting out clearly what she and you are responsible for
that the accountant is a qualified member of a recognised accounting body
holds appropriate professional indemnity insurance.
As you've probably guessed, it's worth lining up your accountant and having a couple of chats with them. A few starting points will be:
- How big is the business (particularly with regard to any need for VAT registration)?
- How are you going to set it up - self-employed, company?
- Separating your business accounts from your personal accounts. It is very helpful to open a separate bank account, and perhaps get a separate credit card.
- What costs can you move into the business, or at least share with the business: Very important - you'll be surprised what you can claim, and every extra pound attributed to the business cuts your taxable profit figure.
- Dealing with shared costs (mobile phone, car, etc.)
- Start-up costs. Get them clear. Especially with the new tax year coming. You may have bought a new computer already, so you need to get that established as a business cost.
Have a natter with your accountant, rustle up a system, then have another natter with more questions. It probably seems like you are entering a secret society with secret rules, but once you've worked out the basics in your head it's actually quite simple.
I would also make time to visit a good bookshop. There are some good books, but some bad. Find one that answers the questions (particularly tax, rather than how to set up a limited company) that you have.
As to managing paperwork, the odds are that a simple Excel spreadsheet will suffice, at least for now. I maintain an expenses ledger as a page. Columns are:
- Date
- Client
- Item
- Payment method (Debit/Visa/Cash/etc.)
- Receipt (Y/N)
- Total value (a sum formula of the category colmns on that row)
- Category (see below)
- Payment method (Visa Card/Amex Card/Cheque No or bank statement reference)
- Capital expense value)
Every expense gets added here:
- Complete date/client/item/method/receipt.
- Put in the value in the correct category. These are agreed wth my accountant and represent the categories that will appear in my accounts: Motor Costs, Phones, Computer Costs, Stationery, Research, etc.
I do this at least once a month, and file all receipts in folders using the same categories. It's very important that you clear your "To File" pile frequently (not least because you forgot what that £20 receipt was, or that you paid cash for a book of stamps last week).
I also study my credit card statements. Any business expenses get marked ("June-1"
and I put also this in the relevant payment column for the card. this gives my accountant easy traceability.
Finally, I go through the bank statement. I add cheque numbers (including the paying off the credit card bills), and mark up every entry (credit/debit) on the statement itself.
With the last two, my accountant can see total traceability - what I bought, how I paid for it initially, and how the money finally came out of the bank account.
I then have other pages for assessing capital costs (and therefore depreciation), proportions of shared costs, invoices & income, a summary of income & expenditure, and personal taxes (interest, dividends, etc.).
This may all sound horrendously complicated, but in practice it is a very simple spreadsheet. Each page is just a glorified table, with only a handful of formulas, and lots of pretty coloured cells so I know whether a cell needs to be filled or not. It makes my accountant's work simpler, which means he asks me fewer questions. It also means that every time I open the spreadsheet, I know how much is coming in and how much is going out.
- How big is the business (particularly with regard to any need for VAT registration)?
- How are you going to set it up - self-employed, company?
- Separating your business accounts from your personal accounts. It is very helpful to open a separate bank account, and perhaps get a separate credit card.
- What costs can you move into the business, or at least share with the business: Very important - you'll be surprised what you can claim, and every extra pound attributed to the business cuts your taxable profit figure.
- Dealing with shared costs (mobile phone, car, etc.)
- Start-up costs. Get them clear. Especially with the new tax year coming. You may have bought a new computer already, so you need to get that established as a business cost.
Have a natter with your accountant, rustle up a system, then have another natter with more questions. It probably seems like you are entering a secret society with secret rules, but once you've worked out the basics in your head it's actually quite simple.
I would also make time to visit a good bookshop. There are some good books, but some bad. Find one that answers the questions (particularly tax, rather than how to set up a limited company) that you have.
As to managing paperwork, the odds are that a simple Excel spreadsheet will suffice, at least for now. I maintain an expenses ledger as a page. Columns are:
- Date
- Client
- Item
- Payment method (Debit/Visa/Cash/etc.)
- Receipt (Y/N)
- Total value (a sum formula of the category colmns on that row)
- Category (see below)
- Payment method (Visa Card/Amex Card/Cheque No or bank statement reference)
- Capital expense value)
Every expense gets added here:
- Complete date/client/item/method/receipt.
- Put in the value in the correct category. These are agreed wth my accountant and represent the categories that will appear in my accounts: Motor Costs, Phones, Computer Costs, Stationery, Research, etc.
I do this at least once a month, and file all receipts in folders using the same categories. It's very important that you clear your "To File" pile frequently (not least because you forgot what that £20 receipt was, or that you paid cash for a book of stamps last week).
I also study my credit card statements. Any business expenses get marked ("June-1"
and I put also this in the relevant payment column for the card. this gives my accountant easy traceability. Finally, I go through the bank statement. I add cheque numbers (including the paying off the credit card bills), and mark up every entry (credit/debit) on the statement itself.
With the last two, my accountant can see total traceability - what I bought, how I paid for it initially, and how the money finally came out of the bank account.
I then have other pages for assessing capital costs (and therefore depreciation), proportions of shared costs, invoices & income, a summary of income & expenditure, and personal taxes (interest, dividends, etc.).
This may all sound horrendously complicated, but in practice it is a very simple spreadsheet. Each page is just a glorified table, with only a handful of formulas, and lots of pretty coloured cells so I know whether a cell needs to be filled or not. It makes my accountant's work simpler, which means he asks me fewer questions. It also means that every time I open the spreadsheet, I know how much is coming in and how much is going out.
My excel is also basic.
I am a 2 man band and I have a simple Excel spreadsheet that has developed over the years as we have grown, and which uses the same headings as my accountant has in the end of year accounts (wages, staff costs, administration, projects costs, premises costs, project costs, travel, subsistence, capital purchases. I work from a monthly template (so one sheet per month in one file) and simly create a new monthly sheet each month which has the fixed costs already entered.
I keep the monthy sheet of costs, showing cash/bank payments in seperate columns (inc. any VAT paid), a sheet of cheques and one of invoices, then one where I calculate the VAT each quarter (which I didn't used to do until the VAT man shouted at me). I have a column to enter the cheque number or SO/DD used to pay any bank payment. The invoice page includes number, purpose, date, Net, VAT, Gross, date paid and VAT quarter accounted in. It adds up the costs under each heading and calculates a VAT paid figure. Simple but does the job.
It has got ever more complex and I now have a summary page where it recalculates the profit, the CT and the net profit, and the % margin over the past 5 years everytime I enter something into the monthly costs sheet. But that is just me keeping watch!
I keep an invoices paper file and a monthly envelope for all receipts. I also keep a running letter to my accountant on the PC of any unusual transactions, such as invoices that get paid twice in error, cock-ups, capital purchases/disposals, bad debts, share dividend payments, directors loans etc.
At year end I simply send the main Excel file to my accountant, print out the list of cheques and invoices with the paper files and cheque book stubs, bundle up the envelopes and pop on the cover letter and bank statements.
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