Running your own business is brilliant. No other career path offers the flexibility, control and excitement of building something of your own from scratch. But, of course, complete control also means absolute responsibility.
As a result, being your own boss brings with it routine administration that you'd usually delegate to somebody else. During the start-up phase, it can be difficult to find effective, easy ways to take care of the boring stuff, leaving you more time to do the work that interests you.
Why Do You Need To Maintain Accounts?
In the excited rush to get started with your new business, it's easy to forget about accounting. However, there are a number of reasons why good record keeping is vital to your success.
First, it is your obligation to keep ordered accounts for the sake of tax and reporting. Even if you work as a sole trader and are not required to publish your accounts, you are required to report your revenue, costs and profits for the purposes of income tax.
It's also useful to keep organised accounts so that you can make the most of your business and maximise your growth. Start-ups never develop into larger companies without a clear strategy and, in my experience, the best strategies are based on insight into finances.
Keeping my own accounts up to date means that I can quickly check my current profit, discover which copywriting clients are most valuable to my business, and identify those clients that I should work hard to grow.
Finally, up-to-date accounts help you to get paid for your work. Using accounting software or implementing a clear procedure makes issuing invoices and chasing late payments hassle-free.
Quite simply, there's no getting away from the fact that your business needs to keep good records.
Do You Need An Accountant?
Although you can't avoid the necessity of keeping accounts, you can offload the responsibility for these accounts to an external supplier. Any accountant is able to help you make sense of your records, and many specialist accountants offer services tailored to the needs of freelancers.
But that is not to say that you need to pay for an accountant right now.
Good accountants do not come cheap and there is a wealth of great accounting advice available online. But, more importantly, the sole trader has no obligation to present accounts in a specific way.
If you are a freelancer without a limited company, and your budget does not allow for an accountant, choose some software that can help you to put together the relevant information.
Of course, if you are required to show your accounts publicly, submit them to HMRC, or plan to apply for investment, you may want an accountant to help you put together the best, most detailed records possible.
And, don't forget - most accountants will be able to help you spot potential savings in your business, particularly when it comes to tax. That could mean that the cost of your accountant is recouped in savings.
Cloud-Based And Online Accounting Software
If you decide to keep your own accounts, my advice would be to find some software that can help you.
Designed to suit smaller businesses but perfectly scalable for larger organisations, the current trend is online, cloud-based software. These solutions allow you to login securely and work with your financial records, directly from your browser. Some examples are
The common features included in these services enable you to:
- Maintain a database of your customers
- Issue quotes, invoices and receipts
- Process expenses
- Link with your online banking to reconcile accounts
- Generate reports including profit and loss, balance sheets and forecasts
- Link with HMRC to submit returns
The best thing about these online accounting services is flexibility. Wherever you are, you can quickly access your accounts. Some solutions even offer mobile applications to manage your accounts on the move.
But this flexibility does come at a cost. Some business owners are uncomfortable with the fact that their confidential financial data exists on a remote server, prone to theft, malicious attack and loss. Although online accounting service providers take every care to protect their servers and mitigate risks, there is no doubt that this approach is less secure than one that remains confined to your desktop.
Desktop Accounting Software
Traditionally, the only option for accounting software was an application to be installed on your home or business computer. These solutions, such as QuickBooks and Sage, keep all of your financial data where it is safest, and eliminate the risk of not being able to access your accounts.
In some cases, these desktop alternatives also offer a wider range of features and more advanced customization. Unfortunately, desktop systems are often also more expensive than their online counterparts.
Keep Good Records While Keeping Hold Of Your Time
As you explore the wide variety of options available to you for managing your accounts, it's not unusual to feel a little overwhelmed. As soon as somebody mentions the taxman, most freelancers tense up and start to wonder if their accounts are as clear and ordered as they should be.
But the reality is that financial records are as much for your benefit as anybody else's. I have found a way of working with my own preferred online accounts system that suits me, fits in with my routine, and ultimately reduces the time that I spend doing administration. The only necessity is that, if the occasion arises, I can explain this method clearly and logically. Check out other tools and resources that can be useful for your home based business.
The single most important thing is that any freelancer or small business owner needs to keep records. Whether you opt for a detailed, expertly formatted breakdown or a folder stuffed with receipts and invoices, keeping hold of information from your very first day will help your business to thrive in the future.