As a self employed individual you are responsible for keeping your finances in order. It is a good idea to have a working knowledge of how to do your own accounting and bookkeeping, so that you can comply with all the relevant accounting and financial regulations.

Dealing with business finances can be a challenge, however if you do a bit of planning ahead to make sure you are prepared, then it is not that hard. So here are some useful tips to help simplify the process.

Getting Set-Up:

The first thing to do is to make sure you are registered as self employed with HMRC and if you qualify then register for VAT as well. Next you have to choose an accounting method. The choice is between the traditional method where you record income and expenses by the date you invoiced or were billed, and the cash basis method where you record income and expenses when you receive money or pay a bill.

At all times you must keep your business and personal finances separate. One of the best ways to do so is to have separate bank accounts with separate banks, so there can be no mixing of funds. Set aside a designated time of day to do your regular bookkeeping tasks, so that they don’t build up, causing stress and potential mistakes later on. It can help to schedule this in your diary so that it becomes a habit.

Another helpful tip would be to choose some form of offline or online accounting / bookkeeping software, to help you and save time. There are many available, so do some research to find the best one for your situation and level of understanding.

Day To Day Accounting Operations:

In order to comply with HMRC, you must keep proper and up to date financial records. These records must be kept for at least five years after the relevant return. A large part of your daily accounting duties will involve updating accounting records and filing paperwork.

Start by tracking all daily transactions, making sure to keep track of any income as well as all related business expenses. Deal with invoices, pay any invoices that are due, while sending out invoices to clients and chasing up any late invoices that have not been paid.

Next check your bank statements. Make a habit of checking your bank statement on a monthly basis in order to check for any discrepancies. Keep a cash book to record payments moving in and out of your bank account. Don’t forget to do a daily financial review and budget forecast so as to know where your business stands with regards to cash flow.

Then file all transaction receipts. Keep all receipts for any purchases, chequebook stubs including any bank slips, and invoices. They should all be stored in chronological order for future reference.

Quarterly and Annual Tasks:

If you are VAT registered then you must file a quarterly VAT report with the HMRC, other than that there is your annual self assessment return. Both can be done online at the GOV.UK site.

Using software for your bookkeeping can make it easier to prepare your annual returns when it comes to your due date, because all of the data has already been entered throughout the year. Now it is just a question of printing reports and reviewing them.

The other good thing is there are plenty of resources available from the HMRC to help, however this is an area where you may consider hiring the services of a bookkeeper or accountant if you feel you need it.