The admin of running your business can seriously take the fun out of being in business unless you are careful. Obviously getting paid is the biggest pain, and next? Well I reckon keeping track of your receipts. At the end of the week there they are stuffed in your wallet, in the footwell of the car, in pockets of your jacket – and if you don’t get a system to record and file them you will lose cash. You can’t claim an expense on your tax return without a supporting “voucher”.
All those small receipts for parking and stationery will mount up over the course of the year. Something like 40% of a small business expenses are less than £10 individually. And if you just stuff them in a bag waiting to deal with them in January when you tackle your self assessment… what a nightmare. So, here is my strategy for dealing with expenses:
1. Routine – make dealing with expenses part of your weekly routine. For example on Friday mornings, develop a checklist of all those boring but essential jobs you know you need to do like invoicing, chasing cash and, yes, administering your expenses.
2. Ask – Make sure you always ask for receipts and put them in a sensible place while awaiting recording eg I use a clear zipped wallet which I keep in my day bag.
3. Recording them – most people use a spreadsheet or paper based expense claim type form. These are fine but technology has moved on a long way – you can now use your smartphone camera and a program like Receipt Bank to capture and record your expenses digitally and also get them into your accounts.
4. Distinguish – Please note you need to distinguish between expenses that you have paid for out of your own cash and those you have used a company credit card to pay for. The latter are not part of an expense “claim” – you will need a separate wallet for receipts that are based on using a company credit card. These need to be attached to your credit card statement when you check it – is this on your monthly checklist?!…
5. Can you claim? – Rather than always wondering if you can claim an expense, create a checklist – There is lots of free advice online–especially on the Free Agent website.
6. Keep copies – Be aware that you need to keep copies of your receipts for at least six years! You are allowed to keep Digital copies and clearly they will be a lot easier to store. But I would recommend using an app that is designed for this rather then something you have created yourself.
Now, if you are looking at a massive pile of unrecorded expenses that need to be recorded for your self assessment, don’t panic. There are plenty of people on services like People per Hour who would be delighted to process them for you.
But please do start the new year resolved to keep on top of your expenses!