When you’re earning money online at home it’s easy to neglect keeping accurate books, and this can hamper success in the long term. Time is often at a premium and it’s the books that constantly languish on the back burner. What’s needed is a simple, effective strategy to get, and keep, the books organised.
Choose a Simple System
When you’re working at home, it’s tempting to blur the lines between household and business expenses. Don’t do it. Have a separate business bank account, and keep business bookkeeping separate from household budgeting.
You don’t need anything fancy to get started with bookkeeping, for either household or business accounts. An Excel workbook, a physical ledger or even just a notebook will get you started. You can refine as you go and grow (see getting professional help, below).
Sit down with your bank statement or stack of last month’s bills, and list each one. Alongside, put down the date paid, amount and how you paid, whether it was cash, credit card, direct debit or other means. At the end of the month, tot up the final figure and balance it against monies earned and your bank statement.
Hold Onto Receipts
Business expenses are easier to keep track of if you get into the habit of saving receipts and storing them in a safe place until you can enter them into your books. Here are a couple of ways to keep them safe:
- A receipt box – it could be a mason jar, a shoebox or a food storage tub — anything handy that you can place in a prominent location to keep it front of mind. Tucking it away in a drawer will defeat the object.
- Plastic filing sleeves pinned to the fridge or beside your computer – write the week number or month on the front, and start a new file/folder at the end of each time period. How often you start a new sleeve depends on how fast you accumulate receipts. As you go through everything and transfer the details into your bookkeeping system, take a photo of business receipts and store digital alternatives instead of the paper copy. You can get a list of all the types of digital files HMRC accepts from their website. Those you need in paper form can stay in the plastic sleeves in a ring binder for safe keeping.
Whichever method you choose will be an on-show reminder to do your books. Clearing that box or filing sleeve will give you satisfaction and a sense of financial control.
Good Books Help You Manage Your Finances
Over time, up-to-date books let you see the big picture of your money situation. You can for instance, see what percentages of your income certain expenses take up, and calculate profit and loss in business accounts.
Glancing back over recent financial history also gives you glimpses into the future. When you’re able to anticipate and predict how much you’ll need to set aside for household fuel in the winter, for example, you can start budgeting during the summer so greater outgoings are easier to meet without placing stress elsewhere.
Another factor many don’t consider is the advantage good books give when approaching lenders for personal or business funding. If you can demonstrate effective money management, you’re in a much stronger position.
Getting Professional Help if You Need It
For some, finding time to manage their own books is a challenge. Busy families or those running side businesses alongside regular employment, for instance, often find it impossible to set aside a regular amount of time to bring books up to date.
The professional services of an accountant or bookkeeper can be life savers. When it comes to bookkeeping, you don’t have to factor in full-time help as it’s often the case that an hour or so each week is enough to keep accurate records. Not only do you know your finances are under control, you have the added benefit of knowing the books are in a format an accountant will find accessible. This will save you time and money when end of year accounts for business fall due, especially for calculating allowable expenses for working at home.