Most of the freelancers we know would rather gnaw off their left arm than do their bookkeeping - and with good reason. It’s confusing, it’s boring, and it’s not what you signed up for. You became self-employed to spend time doing what you love - not wrestling with spreadsheets. But, like it or not, accounting is important as a way to understand your business finances and a legal requirement! Thankfully there’s a simple way to not hate bookkeeping. Let's address the accounting spiral of doom.
It goes like this; you hate bookkeeping so you put it off. Paperwork stacks up, and the task becomes even more daunting, so you put it off more. You procrastinate until you can procrastinate no more and you actually have to do it (usually shortly before the Self Assessment deadline), by which time it’s pure torture. You spend days tackling the backlog and, when you finally finish, you hate bookkeeping even more than when you first started. The cycle repeats until the very mention of accounting makes you run for cover or reach for the nearest bottle of strong liquor.
Bookkeeping shouldn’t be a once-yearly task though - it should be a regular part of your business admin. Let’s say it takes you 36 hours to get everything done before you file your Self Assessment - split that work out over the year and it equates to only about 45 minutes per week. Suddenly doesn’t seem so scary, does it?
Taking care of your bookkeeping in bite-sized chunks has advantages other than reducing your blood pressure - it will give you ample time to get answers to any questions you have or address any problems you run into. If you use an accountant it will give them time to look over your figures and work their tax-efficiency magic (and could also reduce your fees - most accountants charge extra for last-minute returns).
The biggest advantage of staying on top of your bookkeeping, though, is that you’ll get a live picture of your profit and how money is moving in and out of your business (what accountants call cashflow). You probably have a vague idea of how much money your business has to spend at any time, but with your bookkeeping up to date you’ll know how much cash you have to play with down to the penny, and you can figure out how much tax you owe - meaning you won’t get a nasty shock at the end of the year.
With a clear picture of your finances, you can plan better, and use your money in smarter ways. Put some of it aside to make a big purchase later in the year, or start paying into that pension you’ve been meaning to set up for ages. If you’re doing well for yourself, have a word with an Independent Financial Advisor who can show you how best to use all that cash burning a hole in your pocket. You could even do a spot of business development and put together a cashflow forecast.
You’ll find that once you embrace bookkeeping as part of your day-to-day routine, it pays dividends. Rather than being consumed by the accounting spiral of doom, you’ll start to benefit from the virtuous circle of good financial management. Better organisation and more information mean you make better decisions, which in turns means better financial returns, giving you more cash with which to make even better decisions next time.
If numbers are not your thing and you feel a bit overwhelmed at the prospect of bookkeeping, check out 3 Wise Bears, specialist chartered accountants, Coconut, a bank account for freelancers and Solna, an App that helps you get paid on time.
