How I keep my financial records

How I keep my own financial records

As a freelancer you are legally required to keep accurate financial records and expenses going back over the last six years. My trainees often ask me how they should record both their own financial records as well as their client invoices, so I thought I’d show you the system I use myself.

How I keep and record my finances

*  July 2017 update: because I became VAT registered on 1st April, I now use the online accounting system Xero. 

I don’t believe in overcomplicating things so I use really simple procedures.

My bank account

Previously, I didn’t have an ‘official’ business bank account as I’m not a Limited Company and I didn’t want or need the fees and ‘perks’ that come with one such as travel and car insurance.

I used the same account for both business and personal and it served me well for many years. Recently however, Barclays changed their policies which meant I needed a separate bank account for business so I moved to an ‘official’ business bank account.

(Check to see if your bank allows you to use a normal current account as this will do perfectly well for a Sole Trader)

My expense receipts

I have two systems for keeping my different expense receipts:

  1. I have an email folder called ‘receipts to print’ where I put electronic receipts for anything I’ve bought online or recurring payments to my online backup people and newsletter provider etc. I generally try to print these off as soon as they come in and I delete the email once I’ve printed it.
  2. I put these electronic receipts along with any other paper receipts (such as bus tickets, things I’ve bought from the stationers or post office etc) into one of those plastic wallet things.

What I do:

  • I schedule a recurring event in my Google calendar to download my bank statement on the 3rd of every month.
  • I download the statement for the last month to my desktop then, because Barclays puts everything in reverse date order (31st to the 1st), I data sort everything into the correct date order.
  • I copy and paste the date, item and amount into an Excel spreadsheet.
  • I then highlight in yellow everything that I paid for with my debit card and I add any cash expenses as a little table on the side.
  • I tally up the money in and money out at the bottom of the page.
  • I then go through the plastic wallet and make sure I have all the receipts/invoices for anything I paid for with my card.
  • I then put all the paper receipts into a big ring binder. I’ve used the same binder since I set up in 2009 and I just have clear A4 sleeves with a sticker on stating the month and year. The UK tax year runs from 6th April so I write ‘March 2016 to 5th April ‘2017’ and ‘6th April – end of April’ on those particular sleeves (see picture below).
  • I stick the ring binder in the cupboard and forget about it until the next month.
Client invoice folders & expenses ring binder

client invoices

Again my procedure is very simple:

I have a desktop folder called ‘Money’. In that folder is another one called ‘Client Invoices’ and in that one are more folders labelled by the year (see picture above).

  • Each month I export a client’s Toggl time report to my desktop.
  • I also create an itemised invoice in Invoicely (used to be called Invoiceable) and download it to my desktop. I then rename it something like ‘Munro PA Services Invoice 10th Nov – 10th Dec 16’.
  • I email the invoice and time report to my client with a personalised message.
  • I then delete the time report (it’s in my Sent email folder if I need to find it again) and rename the invoice with the client’s name and the date period the invoice covers – so something like ‘Joe Bloggs – 10th Nov- 10th Dec’.
  • I then stick the invoice in the computer folder for the current year.
  • I don’t print out any of the invoices I send to clients. I only keep an electronic one as they’re stored in Invoicely or in my Sent email folder if I need them again anyway.

That’s it. Whether you use a variation of my system or create your own, keep it as simple as possible and make sure it will continue to work as your business grows.

Keeping your financial records is not a big deal and doesn’t require you to stress out or set up the next Enigma Machine. Just keep all your invoices and receipts tidy and know what’s coming in and going out.

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6 Comments

Helen

Great advice…I was starting to get worked up about how to keep the financials and I wonder if I was trying to make it too complicated. Yes I was!

Reply
Bill

Great advice!. Invoicing can really be a complicated issue. Used invoicera one time, worked out fine. Now i use INV24. pretty great online tool, it is

Reply
Sarah

Hey this is really helpful. I just wondered if there is any reason why you don’t submit your expense receipts online with HMRC? I have just registered as self-employed and thought this may be an easier option, but thought a seasoned pro may have a good insight!

Thanks

Reply
Joanne Munro

Hi Sarah thank you very much for your comment. Now I use Xero all my expenses are submitted with my income by my accountant, but previously I just used to submit them to HMRC when I did my online tax return. So although I kept everything as you are supposed to, I just entered my expenses as one lump sum on the HMRC portal.

I hope that makes sense!

Reply
Marta

Hi Sarah,
Can you explain “The UK tax year runs from 6th April so I write ‘March 2016 to 5th April ‘2017’ and ‘6th April – end of April’”? Shouldn’t we instead do from 6th April 2017 until 5th April 2018?

Reply

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