BOOK-KEEPING FOR CONTRACTORS: HOW TO KEEP ACCURATE RECORDS

In the first of our short series on book-keeping for contractors, we look at the importance of keeping accurate records and provide tips to help you keep on top of your paperwork.

When you’re working as a contractor it is understandable that your priority is to keep your clients happy. Focusing on doing your job well, securing your next assignment and balancing work and family life means there probably isn’t much time left at the end of the working week.

However, unless you set aside time to attend to your book-keeping records, you are likely to cause yourself a time-consuming headache when it comes to year-end. Unravelling confusing accounting records is no fun, and it could mean you are financially disadvantaged as a result.

Why accurate records are so important
It’s important to keep accurate records for a number of reasons. Firstly, by keeping on top of your finances you will be sure never to miss a payment from a customer.

The second benefit of accurate record-keeping is that it’s easier to finalise your year-end accounts and work out what tax you owe. With the best will in the world, it’s impossible to remember all the details of your business finances for a 12 month period, so copies of invoices, receipts, quotes, bank statements makes life so much easier at year-end.

With this documentation up-to-date and ready to hand, you can submit an accurate self-assessment tax return and claim tax relief on any business expenses you may be entitled to without delay.

Another benefit of accurate record-keeping is that it shows a level of professionalism, giving the right impression to potential clients and recruiters.

The importance of invoicing records
Whether you send invoices on a weekly or a monthly basis, a good routine will mean that you know you are up-to-date with your invoicing, plus you can track when payments are due and when they have been made. This methodical approach is not just helpful to you – it’s helpful to your clients too.

When you create a new invoice you should also make a note of when it was paid, so that it’s immediately obvious to see outstanding invoices and to know when you need to chase a non-payment. Consider keeping unpaid invoices in a separate section of your file so it’s quick and easy to review.

You can check that your invoicing records and your bank statements match at the end of each week or month. This check should take only a few minutes but will show you where you have made a mistake in your record-keeping. For example, if you forget to keep a copy of an invoice it will be difficult to reconcile your invoicing record with your bank statement at year-end. Monitoring your financial records and your bank statements on a regular basis will prevent having to identify and unravel problems later on.

Invoicing tips

To make sure your invoicing is correct, get into a good routine.

• Decide when you will invoice your clients. Will it be at the start or end of a project, at the end of the calendar month or at the start of a new month? Whilst there will be some anomalies depending upon different customer requirements, it’s a good idea to have your own system where possible. That way you can send out invoices in batches, and know that you are up-to-date. This also makes it easier to set aside the time required to do your invoicing correctly.

• Issue detailed invoices. Invoices should contain the following information
  Contact details: your company name and a business or personal address, plus contact details such as a telephone number or email address.
  Invoice value: you should include the invoice value and a brief description of the work you have delivered.
  Dates & references: you should include the date your invoice has been issued and the payment due date, plus a unique reference number so it’s easy for you and your client to identify a specific invoice.
  Registration information: if you are a limited company contractor, you should include your company registration number. If you are VAT registered you will need to include your VAT number. You should also include the invoice value and a brief description of the work you have delivered.

• Set time aside to maintain your records. Try to set aside a specific time to review your invoices and financial records on a weekly or monthly basis. That way you will keep track of your finances and ensure your records are up-to-date and accurate. While you may not feel like focusing on your finances so regularly, this will pay dividends at year-end when it will be necessary to spend time clarifying anomalies, mistakes and inconsistencies.

For more information or advice on any aspect of contractor accountancy, please see other articles on our contractor blog, or get in touch to speak to a member of our team.