The previous post was all about what your bookkeeping records are (you can view it >>> here <<< ). But what if you are struggling with it? What do you need to do? Here are a few hints & tips. Watch out for the blooper part way through.
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Transcription: Well, what should have been the script, but you know what Actors are like – we do ad-lib sometimes.
You didn’t become a musician or an actor or a freelance performer to be able to sit there and do paperwork, but unfortunately, as with all self-employed businesses, paperwork is a key aspect. Accounts, tax, more tax, and even more tax tends to run your lives at certain times of the year, and a lot of people struggle with the amount of paperwork you end up having to do.
What do you do if you are struggling? Well, there is the option of shove it in a box and deal with it later, but quite often that later doesn’t come, and then you start incurring fines, or you’ll just do your tax return in such a hurry that you don’t actually consider what you’re doing. Here’s my suggestion. All you need is potentially an hour or half an hour a week say on a Sunday to, I don’t know, empty your music bag, empty your pockets, your jacket, your handbag, and find all the receipts that relate to whatever business you have done that week. Note it down in a spreadsheet. Shove the data into an Excel spreadsheet, and then just mark on top of that receipt that it’s done and you don’t have to worry about it. We provide templates for our clients that are fairly easy to use if you use Excel.
What do you do with those receipts? Well, you could get something very simple like an expanding January to December file, and just put them in a plastic wallet inside those expanding files, label it up for that tax year, and there are your accounting records.
Obviously, you have to deal with income. Now, have you been billing your students? Do you get remittance advice from your agent so you don’t actually raise invoices? Is money just being dumped into your account, bank account? What you have to do is put all that together in a different spreadsheet that’s labelled up as income. If you raise invoices, a big tick from me, then what you need to do is also note opposite that invoice, when it’s been paid. That way you can chase up in order to collect payment.
There are also things like mileage. If you use your car for business, you can claim a mileage allowance. As soon as I sit in my car, I write down, in an exercise book, the date, where I’m going, the start mileage and the end mileage, and work out what my business miles were. At the end of the week, I transfer that onto an Excel file, and then I know I’m charging my business 45p a mile or 25p a mile, depending on how many miles I’ve done that year. It doesn’t take much each week, if you are disciplined to do it. What would you rather do? Sit there and struggle for days on end at the end of the tax year knowing the 31st of January deadline is coming up, or just do something simple like this?
Now, obviously, there are accounting & other tools out there on the internet. We do provide some of these tools ourselves. Yes, they do cost money, but, again, what you can do with some of them is take a photo of your receipt, it wings its way off into a system on the internet, and then it comes back, and you can either download it all as a spreadsheet, or you can get it downloaded into an accounting system. The joy of an accounting system is that if it’s learned it once, you very rarely have to keep typing things in. With making tax digital coming on the horizon, then you will need to be getting some kind of accounting system anyway like this. What I advise clients is bite the bullet & start to do it early. Then you’re getting in the swing of it, so you know you will be completely compliant.
Really, all you need for your accounting records, and if you’re struggling with paperwork, are plastic wallets, one per month for purchases, one per month for sales invoices, one for your bank statements, and make sure you have a separate bank account for your self-employed business, and just an expanding folder, January to December. Yes, I know the tax year starts in April, so you’ll start in April, go to December, and then you’ll fill up January, February, March at the beginning of the folder. It might look a bit odd, but it’s safe and secure to hold paperwork. Load it into Excel or other spreadsheets on an accounting system, and that’s it’s done.
An hour a week is not a lot, a couple of hours a month, depending on how much you do. It saves a lot of time and a lot of grief, or, of course, you can give it all to your accountant or your bookkeeper, and they can charge you for it. It’s up to you.