Starting up your own business can be daunting. Not only do you need to get it off the ground, attracting new customers, and working hard to offer your product or service; you’re also responsible for filing the paperwork.
With sole trader accounts, organisation is the key. You need to make sure that paperwork is filed properly, so that your tax return can be completed accurately and on time.
What are sole trader accounts?
The financial paperwork that needs to be collated and kept for a minimum of 6 years includes the following.
Sales and purchase invoices
Invoices of your sales to customers, and what you have bought from suppliers, need to be recorded in a daybook. This could be a physical notebook, a spreadsheet, or a specialised accounts computer package, such as Sage). This daybook will list all of the sales and purchase invoices raised, including the date they were raised, the invoice number, the customer or supplier account, and the amount of the invoice.
Sales invoices should be filed either electronically or paper based, in invoice number order so that they can be easily traced.
For purchase invoices, you could file the invoices in either invoice number order, date order, or supplier order. Again, these need to be easily traceable.
When keeping sole trader accounts, you’ll also need to file bank statements, showing what has come in and gone out of your bank.
Details of any payments made or receipts received need to be recorded in another daybook, called the cashbook. This will need to list the type of payment, the date, who was paid and what the payment was for. This is also required for the receipts side too.
It’s also useful to keep a record of cheque stubs, bacs listings, remittance advice slips, and supplier statements.
Well organised self employed record keeping will make it much easier for you to keep on top of what has been paid and what still needs to be paid. It also means that, if you employ an accountant to do your tax return, he or she can work easily through your paperwork to complete a set of accounts and complete tax liability calculations.
If you’ll be doing your own tax return, find out more about what records you need to keep here.
When they first start doing sole trader accounts, many people find that taking a short course in bookkeeping prepares them to handle their own accounts efficiently in the long term, without the need to employ an accountant.