Managing money is probably not your favourite part of freelancing and you wouldn’t be alone in that. However, it’s essential that your money management is solid if you hope to make more of it.
This means keeping on top of incomings and outgoings, expenses and thinking of new ways to save money.
Claiming for expenses
Any money you take out of your profits to spend on building the business is not technically considered profit. It’s an expense.
So in order to pay a fair amount of tax these expenses should be deducted from your profit to ensure you’re not overpaying tax.
Remember the little things
It’s so easy to lose track of all the little items you buy for your business. You might think that some printer paper or pens are too small to claim for. However, all these little things add up over time and by not claiming for them you could be losing more money than you might think.
How to keep track of expenses
It’s important you’ve got a system in place that will help you keep track of all your expenses so that any claims are accurate and backed up. This means you’ll have to keep hold of receipts, invoices and bank statements.
Should HMRC ever decide to investigate you, you’ll need all this to hand. In fact, you also need to keep your records for at least five years in case HMRC want to look at previous tax returns too.
What expenses can you claim for?
Anything you claim for must be for the benefit of the business. Some examples of allowable expenses include:
- Office costs like rent, phone bills, stationery
- Travel costs associated with the business (not including driving to work)
- Staff/outsourcing costs
- Stock or other items to sell on
- Finance costs like accountancy fees, bank charges, insurance
- Marketing costs like website management, advertising materials
If you’re unsure whether something is an appropriate expense, then you can contact the Self Assessment helpline.
How to manage and keep track of expenses
Good old spreadsheets are still popular for managing finances. These can be great tools for people starting up when things aren’t overly complicated and you don’t have lots of different revenue streams. They’re easy to use and customisable, you can set them out how you want.
However, when your finances get a bit more complicated and you’ve got loads of different things to keep track of, you might want something a bit more substantial.
While this might not be an option in the beginning, getting financial help from an accountant could take the pressure off and leave you to concentrate on your business. An accountant can handle your bookkeeping if you don’t want to manage it yourself and make sure you’re tax compliant.
One increasingly popular way of managing finances and expenses is through cloud accounting software.
With cloud accounting you can view bank feeds, manage transactions, send invoices and upload details of expenses so everything’s in one place. This is handy for when you come to produce your tax return as you won’t have to scramble around to find documents or data.
We’d recommend Pandle cloud accounting. It’s free, simple to use and was built with freelancers and small businesses in mind.
How do you manage your finances and expenses? Let us know your thoughts in the comments section.