Confused with sole trader bookkeeping

andy69_2

My wife is currently setting up a very small business. I am trying to help her the best I can but I am getting a bit stuck on some of this bookkeeping. All she is doing is a mobile nail technician. So she will be taking small cash payments of around £30 each time. She isn't looking at making hundreds and hundreds every week. What I understand so far is that we will have all our expenses recorded and all the income recorded. All receipts will be kept and that's that.
What I also know is that all profits are hers to take as she wishes.
What I don't understand is how does she take these profits? So for example she keeps all her money in a week and deposits it into a bank on a Friday. If she was to then go to the cash machine on a Saturday and withdraw £200 would she have to put this down in the books? If so, how? Also, if she made a £10 withdrawal every day would she have to keep doing this? Seems to be a bit much if she was away for a week and would have to update it all when she came back.
Thanks in advance for the advice, we are both very new to business and have researched as much as possible.

Pennywise

She needs to record her withdrawals as drawings. Then she can cross balance her income against her expenses. I.e. total income, less total expenses, less drawings, equals her remaining balance.

anselld

If she is a sole trader she does not have to separate and account for her personal money separately from the business, not does she need to reconcile her bank account. (Though it can be helpful to do so).

She needs to record only two things ...
(1) Her income (what she charges the customers)
(2) Her expenses (what she pays out for materials, travel , etc)

The difference is her profit. What goes in and out of the bank is irrelevant.

antrobus

anselld wrote: »

If she is a sole trader she does not have to separate and account for her personal money separately from the business, not does she need to reconcile her bank account. (Though it can be helpful to do so).

She needs to record only two things ...
(1) Her income (what she charges the customers)
(2) Her expenses (what she pays out for materials, travel , etc)

The difference is her profit. What goes in and out of the bank is irrelevant.

On the basis that the wife is a "mobile nail technician", I might be inclined to add;

(3) her mileage

On the assumption that being 'mobile' she uses a car to get to the customers homes. I know Simplified Expenses allows 45p a mile.

andy69_2

anselld wrote: »

If she is a sole trader she does not have to separate and account for her personal money separately from the business, not does she need to reconcile her bank account. (Though it can be helpful to do so).

She needs to record only two things ...
(1) Her income (what she charges the customers)
(2) Her expenses (what she pays out for materials, travel , etc)

The difference is her profit. What goes in and out of the bank is irrelevant.

THANK YOU very much. I was hoping you would say that. I didn't think you had to but I kept finding so many contradicting advice on the net.
So, do I not need to input what is going in and out of the bank? So as she is not making hundreds of pounds she could keep it and spend it as she goes as long as she keeps her tax and NI back for the end of the year?
So that also means I don't need to 'draw' money? Or state this in the books? thanks again

TheCyclingProgrammer

Even though you don't have to, personally I'd consider setting up a separate business account and keeping business and personal expenses separate as much as possible.

As a sole trader, the only record keeping you need to keep if she withdraws money from the business account for personal use (I'd recommend transferring it to the personal account and spending it from there) is to show it as drawings in your books - the profit is already hers to do as she pleases with.

You can do everything with one bank account but it's easy to reconcile everything with a separate account.

andy69_2

antrobus wrote: »

On the basis that the wife is a "mobile nail technician", I might be inclined to add;

(3) her mileage

On the assumption that being 'mobile' she uses a car to get to the customers homes. I know Simplified Expenses allows 45p a mile.

Thanks. I have looked into this and we will be doing the simplified expenses for the vehicle.

andy69_2

TheCyclingProgrammer wrote: »

Even though you don't have to, personally I'd consider setting up a separate business account and keeping business and personal expenses separate as much as possible.

As a sole trader, the only record keeping you need to keep if she withdraws money from the business account for personal use (I'd recommend transferring it to the personal account and spending it from there) is to show it as drawings in your books - the profit is already hers to do as she pleases with.

You can do everything with one bank account but it's easy to reconcile everything with a separate account.

Thanks.
she won't need to put money in the bank often as she won't be making much. Does she need to write down in the books each time she deposits into a bank and draws? On a separate spreadsheet as its not classed as an expenditure?

anselld

antrobus wrote: »

On the basis that the wife is a "mobile nail technician", I might be inclined to add;

(3) her mileage

On the assumption that being 'mobile' she uses a car to get to the customers homes. I know Simplified Expenses allows 45p a mile.

That is what I meant by "travel", depending the means of travel.

anselld

andy69 wrote: »

Thanks.
she won't need to put money in the bank often as she won't be making much. Does she need to write down in the books each time she deposits into a bank and draws? On a separate spreadsheet as its not classed as an expenditure?

No, she doesn't need to.

PasturesNew

She needs to account for all money she receives from the business - and all money she spends on the business and all money she spends for herself.

If, say, she banks £100, she should have some method of knowing who paid her, how much, when and what for.... that could just be a diary of appointments with the amount against each person at its simplest.

But, that £100 ... if on the way home she stops off at the pub, buys a burger and chips for herself and a friend and hands over £20 at the till, then her books should reflect:

IN: £100
OUT: £20 "wages to me"

So that when she empties her pockets and there's just £80 in there to take to the bank she can know in 6 months time where it went.

If, on the other hand, she spends £20 on the way home on a set of new combs from the wholesaler she'll have a receipt and her record keeping should show:

IN: £100
OUT: £20 on combs
BANK: £80

It's easier/better if she's tough with herself and keeps a separate account - especially with so much cash floating about it'd be easy to get confused, get lost, forget.

In short, she has to be able to account for money if ever asked.

If you picked up her diary in 3 months time and pointed to a "Mrs A/bits" - could she say "Yes, that's Mrs Apeworthy, bits is when I glitter her nails. She paid me £30 for that and I spent it at the pub and on the fruit machine so it's down in the books as £30 income and £30 "wages to me".

And that's why it's important to have separate accounts and be "strict" with cash.