As you may well know, not only do I run this blog but I also run a virtual assistant business, Boatman Admin Services (shameless plug!). I had a quick learning curve in setting up the business, becoming self-employed and all the back office systems you need including how to sort out my expenses!
It may, or may not come as a surprise that if you’re earning income from running your blog, be that through sponsored posts (like this one) or adverts then you need to register as self-employed. Chances are you’re fabulous at creating content, taking amazing photos and then being a social media butterfly but what about the business side of things?
Apparently there are around five million micro-businesses in the UK. Many of these are home-based. Running a business from home is a popular option since it saves on office rentals and simplifies any need to organise time around family demands. Devising an effective accounting system helps that simplification not turn into something more complicated.
Registering as Self-Employed
This should be the first thing you do when you start a home business. Even before you make a penny in profit, HMRC wants to know what you’re doing. When you register as self-employed, you’ll be given unique identifying numbers that let you log into the HMRC gateway. From there, you can file your tax return online (or your accountant can do it for you). Filing online is another way to simplify accounting, especially if you use an online accounting service.
File Your Receipts and Invoices
Even the smallest businesses generate lots of paper, with receipts and invoices being the tip of the iceberg. It’s easy for those important records to get lost if you don’t have a system. Either file them physically in sleeves in a folder (staple them in date order to a sheet of paper to keep them together), or scan them or take a photo (include the front and the back) and store them in a computer file. You can save this to a local drive, or upload them to cloud storage using Dropbox, iCloud, Google Drive or any of the many
others. It helps to have your own receipt numbering system to make it easier to cross reference against written explanations in your bookkeeping records.
Simple Bookkeeping Methods
The law says you must keep accurate records of business transactions, but the accounting system you use is up to you. Use a notebook, an Excel spreadsheet, or sign up for online accounting services. You don’t need complex or expensive accounting software that demands information on payroll or VAT when you’re just getting started. As the business grows, you may want or need those things but, if you don’t need them don’t give yourself the headache of wrestling with them.
Separate Household and Business Accounts
It’s much easier when you have separate bank accounts for the businesses, rather than trying to run everything through a personal account then sort out transactions later. Business banking is normally free for at least the first year, so it won’t put any extra strain on start-up finances, and opening an account is relatively simple. You won’t need to present a business plan or any other form of documentary evidence unless you want to borrow money.
Professional Accounting Services
Accountants and bookkeepers will help keep your business finance records up to date. You could hire a bookkeeper for a few hours each week or month depending on your needs. They’ll help you figure out a good system for your level of business so your accounts don’t become over-complicated. Another advantage of having a bookkeeper’s help is the knowledge that your records will be accountant-ready. Your accountant will extract the information needed for your tax return and prepare your end-of- year reports. The process will be much quicker (and therefore less expensive) if your books are up to date and
organised properly. Keep your accounting as simple as possible, get some professional help if you’re
struggling or want more in-depth advice, and your business books will provide a valuable insight into progress and growth.
I hope this post has been helpful and shows that it’s not that scary at all!