Easiest way to do your accounting?

NICHOLAS_2

I looked at these software tools for accounting and they seem quite a bit of a pain in the bum and difficult.

This is what i would like to do for my accounting, is it a good way for a sole trader?

Total up business expenses monthly, dumping all the receipts into a folder so that i will have 12 folders full of receipts for the year with my figure to minus from profit.

Pay for as much stuff as i can with my business account so that there is some sort of link and back up information.

Have another book where i write customer number 1, how much they paid, customer number 2, how much they paid. And then the total at the end of the year has the expenses deducted from it.

Is that basically it? Or does it have to be more detailed than this? Do i have to store away quotes or customer invoices? Which i often lose, and do i have to have receipts for everything i want to claim as an expense or is it ok to pay for something with your card, not get a receipt, but log the purchase on a bit of paper to put in with other receipts etc.

I will probably have around 20 customers a year so just want to keep it simple without having to mess about with software. Or spreadsheets.

paddyrg

There's nothing wrong with that system as long as 1) You understand it fully and 2) it captures all the transaction details. If you've 20 customers a year, and a few dozen invoices/transactions then it's not a bad way to work. If you get busier, it won't scale well though!

The purpose is to satisfy HMRC if they investigate you that you're keeping and submitting accurately. They like cross-referencing, separate files, unique numbers etc., so if they see you're in good order they'll be happier than if they just see a shoebox of chewed receipts!

Poundland do duplicate books, and £20 will get you a good rubber stamp work your address/business details. Helps keep things in order

trailingspouse

The more you keep (filed, so you can find it again) the better. But on the other hand, the system has to be manageable and there's no point in over complicating things.

I run a limited company - I don't use software (tried Sage but it didn't work for me), I use a simple spreadsheet provided by my accountant when we first set up 4 years ago.

The spreadsheet is divided into three sheets per quarter - one for cash incomings and outgoings (including anything spent on a personal card on behalf of the business), one for bank incomings and outgoings, and one that works out the VAT.

Every single thing is recorded (I set aside a morning once a week for paperwork), and I number each receipt and file it, recording the number, date, name, and amount on the spreadsheet. I also use a highlighter pen on the amount and date, to make it easier if I have to look at them again. All our invoices are numbered and recorded in the same way, with the date paid and amount. I store a hard copy of the invoices in a ring binder (I'm an old-fashioned gal!) - paid ones go behind the subject divider, unpaid or part-paid ones go in front of it, most recent at the top. I can see at a glance how much we're owed, and I make a diary entry to chase overdue payments at the end of 30 days.

I see nothing to be gained from not storing your quotes - store them either electronically, or just in a simple ring binder. You need to decide how to order them, eg in chronological order of when you did them (the easiest way) or in alphabetical order of the person you did them for (the easiest way to retrieve them when someone calls and says 'you know that quote you gave us, we'd like to go ahead').

And basically, yes, you need receipts for everything you want to claim as an expense. In 4 years I've only put through 3 items without the receipt (and they were backed up by the bank statement) - it wasn't an issue, but if I made a habit of it I'm sure my accountant would be having words. If you don't keep your invoices, how can you be sure you've been paid, or paid the right amount? What if someone comes back later and queries work that you've done - how can you prove what you did or didn't do? I don't know what line of work you're in, but I also find it useful at the end of the year to go back through what we've done to find out which areas were most lucrative, with a view to future marketing etc.

Whatever you do, don't 'dump' receipts anywhere. The less work you make for your accountant, the less they will charge you. If they have to spend their time unscrunching a bag of crumpled receipts, you'll see it reflected in your bill. They don't like having to do it any more than you do - and they will charge you for it. If you turn up with everything neat and easy to find, you make their job easier and your bill lower.

The old-fashioned alternative to spreadsheets is to do it on paper - not impossible, but spreadsheets can be set up to do the calculations for you, and if you make a mistake inputting the info it's easily sorted. I'd go for the spreadsheet option if I was you.

enjoyyourshoes

Suggestion:-

have something to put all your receipts into, sturdy envelope/file/plastic wallet so as you don't loose any. This can be kept in your Van/Car or Kitchen (empty your wallet of all necessary receipts daily) You need your receipts for purchases as they are your proof.

Do monthly summary religiously (expenses and income) , copy your summary and staple it to all you monthly receipts and invoices. VAT man (or woman) like that.

Could have a file per customer with summary of invoices pending, sent, paid & cleared (if cheques) and cost associated with each one. So as to see clearly any outstanding payments making managing chasing debts easy.

InsideInsurance

Easiest way? You pay someone to do it for you. That aint the cheapest way though.

Similarly a Ltd rather than Sole Trader which creates additional complexities but certain simplicities too. Likewise just use a spreadsheet provided by the accountant as data entry and it has a couple of tabs doing the calculation.

As to receipts/ invoices. Only generate 1-4 invoices a month and probably less than 20 receipts. Details get logged into the spreadsheet, scan the originals and have a standard naming convention based on their date. As at most I have 3 receipts for any one date there is no need to capture the reference in the spreadsheet.

The complexity of a Ltd is the need to do balance sheets and things other than a simple P&L but the simplicity is the accountant does it for us.

Mistral001

The OP's system seems to be spot on as far as I can see. Seems to be clear and simple.

Aquamania

NICHOLAS wrote: »

I looked at these software tools for accounting and they seem quite a bit of a pain in the bum and difficult.

This is what i would like to do for my accounting, is it a good way for a sole trader?

Total up business expenses monthly, dumping all the receipts into a folder so that i will have 12 folders full of receipts for the year with my figure to minus from profit.

Pay for as much stuff as i can with my business account so that there is some sort of link and back up information.

Have another book where i write customer number 1, how much they paid, customer number 2, how much they paid. And then the total at the end of the year has the expenses deducted from it.

Is that basically it? Or does it have to be more detailed than this? Do i have to store away quotes or customer invoices? Which i often lose, and do i have to have receipts for everything i want to claim as an expense or is it ok to pay for something with your card, not get a receipt, but log the purchase on a bit of paper to put in with other receipts etc.

I will probably have around 20 customers a year so just want to keep it simple without having to mess about with software. Or spreadsheets.

You need to keep proper accounts, backed up by genuine documents (receipts, invoices, etc)

A box full of receipts isn't really good enough. Will you be able to say in maybe 6 years time what a specific receipt relates to?
(Some may not be very specific)
Best to keep a record of expenditure, with the receipts available to back that up.

As for income, you should keep copies of invoices you raised. Good practice is to have these numbered in some sequential way to avoid suspicion you haven't 'lost' every other one and just pocketed the money without declaring it.
If you don't want to computerise this, a good old fashioned duplicate invoice book has worked well for many people for years.

You don't need to keep copies of quotations (at least not for HMRC purposes, you you might well want to for other purposes)
All HMRC are interested in is what you have received and and you have spent (along with the documentary proof if they want to check it)

TheTracker

I use accounting software. But I also keep a ledger in excel. Tab 1: invoices / accounts receivable Tab 2: expenses. Tab 3 bank transactions. Tab 4. Liabilities. Tab 5. Assets. Tab 6 dividends.

puppey

these online systems are quite cheap, like xero, and you can upload scanned pictures of receipts into the system.

TheTracker

puppey wrote: »

these online systems are quite cheap, like xero, and you can upload scanned pictures of receipts into the system.

I recently moved my ltd co to one of the online systems, of which there are many (freeagent, zero, kashflow etc). Currently I am running it in parallel to my mac software. I don't have many transactions (a couple of invoices, a handful of expenses) each period but it probably does save me an hour a month. I imagine with what those above do it would save many hours a month, particularly if you need to otherwise pay someone for RTI payroll and VAT submission. I'm not sure I am going to stick with it as they are expensive, and by expensive I mean the software and website quality do not justify charging customers £20ish a month, even if it saves me a little time.

Pennywise

TheTracker wrote: »

I mean the software and website quality do not justify charging customers £20ish a month, even if it saves me a little time.

Most decent accountants will just recharge out at their lower wholesale cost for their own clients. We certainly do. That usually brings the monthly cost down to under £10 for most of the popular systems.