Bookkeeping for IT contractors
The most relevant decision to be made here is whether to the necessary bookkeeping and paperwork yourself or to get someone else to do it for you, and there is no right answer to this. It may depend on how busy your business is and how many invoices you are issuing per month and how many different business expenses paid that have receipts. It’s not always the amount of monies that a business is earning or incurring that drives how much bookkeeping is involved. Each transaction usually needs to be posted separately in a bookkeeping system, which is fine is you have a number of high value invoices and few paper driven expenses but can be tedious if you have ten different magazines to buy monthly from ten different newsagents or three to four satellite offices to visit a month.
There was a time when the standard advice offered by your Accountant might be along the lines of keep a show box and put all paperwork, bills, receipts in there until year end. We do live in different times though and setting up a filing system in your email box, or a file directory on your laptop to cover expense receipts emailed to you and invoices created, could be far more relevant advice.
Apps can make it easier too
There are apps too that allow you to take a photo of any relevant expenses and have them captures and entered onto your accounting system of choice but as yet these have seen minimal adoption in the marketplace. Often such software solutions have poor customer service functionality until they reach appropriate scale to justify investment in service and so caution is advised before placing dependence or signing Direct Debit authorities to such SaaS solutions.
Go to the cloud
Online and cloud solutions for Bookkeeping have their advantages too, mainly the accessibility from wherever an internet connection is available allowing the user to process transactions and review their books and records from almost anywhere. Such solutions usually have security advantages over traditional recording of entries on an excel spreadsheets.
The long term benefits of an accurate Management Accounting module are often missed by the users of these systems as a result of not accurately setting up charts of accounts at the outset and not giving any thought in what categories of income and expenditure maybe appropriate. However overall there are great benefits to setting up with online systems such a Xero, Quickbooks or Free Agent and they tend to be cheap to run on a monthly basis and are quite intuitive. We’d advise you to work with somebody like Tax Agility, to help you set these services up first though.
The main source of information to post transactions for should be the business bank account. Keeping distinctive bank accounts for personal and business expenses is highly advised. If you do decide to hire a Bookkeeper to assist with keeping records up to date monthly their credentials should be checked to ensure that they are registered with an appropriate Accounting or Bookkeeping body as having passed their exams.