3 Accounting Tips for A New Home Worker
Working from home can have huge advantages from a time and autonomy perspective, but it comes with some responsibilities. These include keeping your business accounts straight and, while it might seem overwhelming at first, setting up a simple system to get started isn’t so hard. As a work from home blogger I am now registered as self employed meaning I am now responsible for filing a tax return. I have been self employed previously so I do have some idea of what I am doing when it comes to accounting so I thought I would share my top 3 accounting tips for a new home worker.
3 Accounting Tips for A New Home Worker
Open a Business Bank Account
This should be one of your first tasks. With a business bank account you can keep your personal spending separate, and this makes bookkeeping much easier and faster. Later on, when you decide an accountant’s skills would help your business operate more efficiently, you probably won’t want to share your personal finances with them. Business bank accounts are simple to open, and unless you want to borrow money or run an overdraft you won’t need a business plan. Most banks give at least one year free banking while you find your feet and get established.
Save All Your Receipts
HMRC will accept digital forms of most receipts and other paper documents, so only save paper ones until you’ve scanned or photographed them and they’re safely stored on your computer, external drive, or in cloud storage. It helps to create your own numbering system for receipts, which could be as simple as a numerical list if you don’t have many, or a more complicated, coded number that includes client or category information. Whichever system you choose for numbering, it’s easier to cross reference the digital or paper evidence to the entry in your accounts when you use your own recording method.
Whether you keep paper or go entirely digital, make sure you have a filing system that’s logical. Not keeping hold of paper doesn’t excuse you from filing; it just means you don’t have large filing cabinets taking up valuable floor space. There are some paper documents you need to save in their original format. If you’re not sure which paper to keep and which you can safely throw away, a professional bookkeeper or accountant can advise.
Know when to get Professional Help
You can, of course, bring in the professionals at any time. But for many new home workers, taking a DIY approach works well in the early days. If you find bookkeeping fun and rewarding, there’s no reason why you shouldn’t always do your own books. Crunch time tends to come either when your first tax return gives you sleepless nights, or when bookkeeping takes you away from more profitable business activities. Alternatively, you may find your business grows beyond your ability to keep everything legal and compliant, especially if or when you start taking on employees.
There are a couple of different routes you could take:
- Hire a bookkeeper for a few hours each month to run your books and keep up with invoices.
- Hire an accountant (who can also undertake bookkeeping) to take care of end-of-year accounting and file your tax return.
Both routes have advantages: A bookkeeper will make sure your books are up to date in a format an accountant expects. This can lower your accountancy bill as they won’t need to straighten out your books before they can begin work. An accountant could also offer business advice if your figures show areas where your money could perform better. They’ll also make sure you’re properly claiming all your allowances, potentially lowering your tax bill.
Figure out your accounting system early on when you start home working, then refine methods as time passes and you gain confidence. Keep things as simple as possible while tracking all your income and expenses, and you won’t go far wrong.
Managing your finances when your first start working from home does not have to be a daunting task. My 3 accounting tips for a new home worker will hopefully help you get started and feel more confident about your new career.