Warning: Declaration of thesis_comment::start_lvl(&$output, $depth, $args) should be compatible with Walker::start_lvl(&$output, $depth = 0, $args = Array) in /home/maxxers1/public_html/timemoneyproblem.com/wp-content/themes/thesis_186/lib/classes/comments.php on line 0

Warning: Declaration of thesis_comment::end_lvl(&$output, $depth, $args) should be compatible with Walker::end_lvl(&$output, $depth = 0, $args = Array) in /home/maxxers1/public_html/timemoneyproblem.com/wp-content/themes/thesis_186/lib/classes/comments.php on line 0

Warning: Declaration of thesis_comment::start_el(&$output, $comment, $depth, $args) should be compatible with Walker::start_el(&$output, $object, $depth = 0, $args = Array, $current_object_id = 0) in /home/maxxers1/public_html/timemoneyproblem.com/wp-content/themes/thesis_186/lib/classes/comments.php on line 0

Warning: Declaration of thesis_comment::end_el(&$output, $comment, $depth, $args) should be compatible with Walker::end_el(&$output, $object, $depth = 0, $args = Array) in /home/maxxers1/public_html/timemoneyproblem.com/wp-content/themes/thesis_186/lib/classes/comments.php on line 0
Accounts for Self-Employed People – Scary Stuff, but Necessary — Time Money Problem

Accounts for Self-Employed People – Scary Stuff, but Necessary

Wednesday, 5 June, 2013

in Real World Jobs

Accounts for the self employed are an unpleasant but essential chore. If you have accounts then you can argue with the IRS or HMRC, without them they will make an arbitrary assessment of what you owe, and it will not make pleasant reading.

How Complex Do Self-Employed Accounts Need to Be?

The tax authorities will need an account of your income. They will want to know who paid you what and when, so all this needs to be recorded, as it happens. They will also want proof of any expenses, so you will need to keep receipts as well as listing every business purchase in your accounts.

If you are working from home then you can claim a portion of your fuel bills as a business expense, but you will need to keep the bill in case of a tax audit.

Pencil and Paper

The simplest form of book-keeping is just to write everything down in a notebook. This is what I did for many years with my home tuition business. If it is simple then you are more likely to stick with it and to record everything.

Snartphone App

The next step up is the electronic version of the paper notebook, a smartphone app such as Expensify. Many people run their business from their smartphones, so an accounts app makes sense, as long as it is simple to use and you record everything. Be sure to back everything up though and to password-protect such sensitive data.

Excel Spreadsheet

This can be as complicated as you want to make it. In its simplest form it can just be two lists, one of expenses, the other of income. The important thing is to keep it updated every day. I am happy using Excel but updating my accounts spreadsheet was a chore that I always put off and it became  a once every three month monster of a chore.

You can use spreadsheets for everything from a business plan to paying your employees, but it becomes increasingly complicated. There is also a good chance that you will make mistakes unless you are really an Excel expert.

Accounts Software

Accounts packages come at a range of price points. You really need one that includes annual upgrades that take account of all the annual changes to the tax code. These will do everything you want them to do but, they have one big disadvantage: you need to enter data into them. You still need to sit down frequently and to record every income or expenditure transaction.

Small business accounts are big money-spinners and you will find they are heavily promoted all over the Internet, but they are not the accounts panacea that they are sold as.

Hire an Accountant

This is the simplest solution. It’s the one I have gone for, after trying all the previous options. You still have to give your accountant a list of your income sources and expenses, but this is not too arduous. You know the job is going to be done right and you can even ask him or her to fill in your tax return for you, which is a major stress for me and many other business  owners.

The accountant deals with all queries from the IRS or HMRC. He knows what expenses the tax authorities will accept and can help you to pay less tax by giving you advice as to the structure and financing of your business. He will warn you of imminent cash-flow problems and give you advance warning of any large tax bills that are coming due.

Cost-wise an accountant comes in about the same as buying an accounting program and he does all the work, so you have less stress. Finding one is the tricky part; recommendations work better than just a web search because this is someone who you will have to trust and deal with on a very confidential level. You do not have to physically meet your accountant, but most people will want to do so, so a local professional is your best option.

Large accountancy practices will charge more because they have many more overheads such as renting those prestige offices that feed through into your bills. I found a one man accountancy practice where the accountant has a home office, like mine, but much more tidy. He is my own age and I immediately felt a rapport with the guy.


{ 0 comments… add one now }

Previous post:

Next post: