When you’re working as a contractor, it’s likely that you focus more on securing jobs and completing the projects you’re working on rather than being driven by a desire to do your business accounts.
But while managing your money can sometimes be a fairly mundane task, it’s also a vitally important one - and every business will likely struggle to survive if this isn’t done properly.
So what’s the best way to ensure to avoid a headache when doing your accounts? Would trying to input all of your data into an unwieldy spreadsheet, or using specialist desktop software designed for accountants and filled with technical jargon, be suitable? Or would it be better to join the increasing number of people who use a cloud system specifically designed for contractors to manage their finances?
Emily Coltman FCA - Chief Accountant at the UK’s market-leading online accounting system FreeAgent - explains how a cloud system can offer significant benefits for your business.
You have access to timely financial information, anytime, anywhere
If you’re summarising your transactions on a spreadsheet, it’s unlikely you’d be able to see whether you’re charging your customers enough or whether particular costs look too high. And you’d probably not be able to check how much tax you can expect to pay either.
However, with FreeAgent all of that info about your business’s profit and cash is there at your fingertips to help you make timely decisions about your business’s future.
As the software is online, you can also view this information wherever you are, provided you have access to the Internet. For example, you could look at your accounts on your iPhone when you’re on the train on the way to meet a client, and make sure they’ve paid your last invoice! And with FreeAgent you can also scan receipts on your phone and upload them directly to your accounts - saving you even more time.
It does your sums for you - and saves you hassle
As FreeAgent is web-based, it means that all updates to the system are automatically available - removing the need to manually update the software yourself or be looking out for changes at Budget time.
Furthermore, if you’re using a spreadsheet, you may find that one mistake in a formula (such as a column SUM not picking up the bottom row) means that your figures will be incorrect. With FreeAgent, however, these calculations will be done automatically for you. This minimises the risk of inaccuracies appearing in your accounts, as - provided you have entered the right information - the figures should be correct.
With FreeAgent you can also file tax documents online, such as VAT returns and RTI submissions, directly with HMRC - saving you the hassle of doing this manually. And sole traders can even complete and file Self Assessment tax returns from directly within FreeAgent, without the need to use HMRC’s online portal.
You’ll save time and increase your efficiency
If you’re using a spreadsheet to manage your finances, you may find you spend hours - or even whole nights - every week updating them. And that’s all time that could be spent more productively elsewhere; such as finding new clients, taking on more projects and growing your business.
Furthermore, if you use a spreadsheet, you may also find that your accountant spends all their time turning it into accounts at the end of the year - leaving no time to give you any wider insights or advice about your finances.
With FreeAgent the whole process is streamlined. By using a direct bank feed - or by uploading your bank statements directly into the system - you’ll be able to easily explain all of your business bills, expenses and payments and use that information to automatically forecast how much tax you owe. Furthermore, you can use the system to easily raise invoices and chase payment from your clients - and if you have recurring invoices, you only have to explain these transactions once, as FreeAgent will then recognise and include them in your accounts in the future.
It’ll be easier to collaborate with your accountant
FreeAgent can also revolutionise the way you work with your accountant.
Unlike with a traditional desktop-based package, you and your accountant can both see your records in real time, at the same time, by each logging into FreeAgent from their own computer, iPad, or other device. That means that your accountant can offer timely, proactive advice, rather than having to wait until the end of the year to correct any mistakes or suggest that you should put your prices up, or highlight where you may be able to make tax savings or where you could cut costs.
It also means that you no longer need to live near your accountant’s office. You could be hundreds of miles away from your accountant but - if you’re doing a VAT return, for example - they could log into your online accounting system and watch you input your data, and correct any mistakes you make, in real time.
And because you’re collaborating with them in real time, it’s quicker and easier for your accountant to review your books - which means they’ll spend less billable hours on basic admin. This means that, as they’re saving time when doing the basic number crunching, you’re also freeing your accountant up to provide wider, useful financial information about your business which could be invaluable for its future growth.
You’ll look more professional to your clients
FreeAgent provides templates that enable you to create professional-looking invoices to send to your customers. And you can turn these into recurring invoices if, for example, you charge the same customer for the same amount every month or every week - and even send automatic emails to chase late payments.
FreeAgent also enables you to send estimates to your contacts and create reports of the time you’ve spent - all at the click of a mouse, rather than hours of wrestling with Excel.
Although using a cloud system for your accounting can be a daunting prospect, FreeAgent is designed to help contractors keep accurate, up-to-date records. It’s a simple, jargon-free system thats provides you with crucial financial information about your business, enables you to work more effectively with your accountant and your clients, and puts you back firmly in control of your business’s accounts.
Emily Coltman FCA is Chief Accountant to FreeAgent, who provide the UK’s market-leading online accounting system designed to meet the needs of small businesses and freelancers. Try it for free at www.freeagent.com