Emily Coltman ACA, Chief Accountant to FreeAgent – who provide an accounting system for freelancers and small businesses – gives five top tips to help you make sure you don’t miss out any of your expenses:
As a freelancer you’ll almost inevitably spend money out of your own pocket on your business’s costs.
It’s important to keep track of this money, partly to make sure you don’t pay more tax than you should, but also because the costs you pay out of your own pocket still count as costs of the business, so if you don’t track them, you could think your business is more profitable than it is – which means you’re at risk of charging too little, or running out of cash.
Here are the top tips for keeping track of your freelance expenses:
Have a set place to keep these, whether that’s a particular slot in your wallet, a certain pocket in your laptop bag, or a clear plastic wallet that you carry with you.
This makes it much easier to keep all your receipts and lessens the risk of losing any of them.
Identify a regular slot of time when you can take all your receipts out of their designated storage place and process all of them together. If you can make a commitment to do this each week, or month, then you’re less likely to leave them and forget about them.
It’s also a good idea to incorporate your expenses into the time you spend on your wider bookkeeeping. Dedicating an hour a week to go through all of your business books – including managing your invoices and bills, monitoring your cash flow and checking your business’s profitability – is a great way of putting you back in control of your finances.
Once you’ve collected all your receipts and set aside some time to process them, use a mobile application like ReceiptBank which will let you photograph your receipts on your mobile phone and – if you’re using an online accounting system – post the receipts directly into your business accounts.
If you have a mobile application that you can use, then you can photograph and process your receipts wherever you are. Some online accounting systems like FreeAgent are also fully mobile optimised, so you can photograph receipts on the go and attach them to your expense records.
I’ve processed my expense receipts while waiting at Heathrow Airport, or in the back of a taxi, or even walking across London – time that I couldn’t otherwise spend working.
This makes the best use of your time while ensuring that you don’t miss claiming any expenses.
If you’re not sure whether or not you should include a certain expense in your business costs, then don’t just leave it out: ask your accountant whether you might be able to claim it. You never know – you may be able to claim tax back on an expense that you didn’t think was allowable. So don’t risk paying too much tax for the want of asking a quick question!
Managing pieces of paper is never easy but there are tools out there to help you keep track of everything you’ve spent personally on your business and make sure that its accounts are correct.