According to the Office for National statistics, the number of people classed as self-employed in the UK stood at around 4.6 million in 2015. Many of those people are working in the so-called gig economy. There are various drivers behind this trend, including lack of long-term job security in traditional employment and ways modern communications have broken the connection between ‘job’ and ‘location.’
While the gig economy offers working freedom beyond that available in the normal 9 to 5, there are still rules and regulations that must be obeyed. You’re mostly free to work for whom you want, wherever you please and during convenient hours, but there’s no escaping bookkeeping or accounting or paying due taxes and national insurances.
Here are four tips to minimize the stress of keeping necessary financial records up to date:
#1 – Track Expenses
Every activity has an associated cost, either to you or to your client. Therefore, it’s vital to keep track of time as well as physical records of expenses. Physical records can include such things as:
- Petrol receipts or other travel expenses.
- Hospitality costs.
- Purchase receipts for capital equipment such as computers or items held in stock.
- Invoices you send out requesting payment for services or goods rendered.
- Cost of doing business expenses, such as subscriptions or accounting fees.
How you track expenses is largely a question of personal preference. For example, you could use cloud accounting software or services, create a spreadsheet in Excel, or simply throw everything in a box to hand to your bookkeeper at the end of the month.
Whichever you choose, maintain consistency and regularity, especially if you have several different clients or streams of income from different types of work.
#2 – Digitise Records
One of the reasons the gig economy is thriving is because communications have severed the traditional ties between job and location. It’s easy to keep in touch, swap files and documents, or make inquiries in the digital environment.
It makes sense to carry this digital approach over to maintaining business records, and HMRC happily complies with much of what we do digitally in many accounting tasks. They will, for instance, accept digital copies of many paper records such as receipts. Exceptions include anything to do with tax, although digital copies of VAT records are allowed. Tax documents that need to be kept in their original form include bank interest certificates or dividend vouchers.
Making digital copies of paper receipts or other documents can be as simple as taking a photo with a smartphone or using a freely available scanning app.
Don’t, however, assume that digital records need no organization. You still need a system to find relevant records easily, such as maintaining the same file naming convention throughout, for instance, or organizing all files by month in named folders.
#3 – Backup Your Data
This is one of those tasks that’s often forgotten or endlessly put off, which can be disastrous for any business.
Business records should be kept for at least six years, and during that time, the average business owner will upgrade computer equipment at least once.
If you keep copies of your financial records on your local hard drive, you’re risking losing everything in the event of a terminal crash or by simply leaving a file folder behind when you do a transfer.
Relying solely on the cloud isn’t ideal either. For the best security and peace of mind, invest in an external hard drive and perform a backup of all your critical accounting records every month. This will be much easier if you followed the tip above and organized your digital records with a logical structure.
#4 – Ask a Professional
It’s never a waste of time or money to get professional advice regarding bookkeeping or accounting. It can be especially beneficial to those just starting, so you at least know which records to keep hold of. For example, if you plan to hire a professional bookkeeper to update your books monthly, knowing which records to keep and how to store them will save time and money in the long run.
Working within the gig economy may mean more casual hours and a more flexible approach to business operations. Still, it should never lead to complacency in keeping good financial records for accounting purposes.
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