Bookkeeping for consultants: how to make it easier

Bookkeeping is often the most tedious part of being self-employed. It requires time, thought, and attention to detail. For a business with a lot of different clients, like consultants, it can quickly become overwhelming, increasing the chances of a silly mistake.

To prevent bookkeeping mistakes, and make the whole process a lot easier in general, we’re going to give out some simple pieces of bookkeeping advice for consultants.

Specifically, we’ll be covering:

• How to create invoices
• Charging for your time
• Opening a business current account
• Recording business expenses as you go
• Using accounting software

Accurate invoicing is the cornerstone of business bookkeeping. It’s essential for receiving payments on time and having accurate records of your business finances. 

To keep you right, here’s a checklist of everything you need to include for a professional invoice. Bear in mind that not all of these will apply to your business, if you are a sole trader or not VAT registered:

• A unique invoice number. They need to be different for each client. For example, John Smith’s invoices could be numbered JS1, JS2, JS3 etc.
• Invoice Date.
• Company or business name.
• Limited Company Registration Number.
• VAT Registration Number (if applicable).
• Limited Company Address.
• Contact details – email, address, and phone number.
• Client or agency’s name and address.
• Description of the services you’re providing to the agency/client.
• A breakdown of hours and rates. For example, 35 hours at £40 per hour.
• Date when the services were supplied.
• Amount charged for services.
• Amount of VAT charged and the rate.
• The total amount charged (including VAT if applicable).
• Your business bank account details (sort code and account number).
• A client reference number or Purchase Order (PO) number are typically required.

When dealing with invoices, there are a few good practices that will help make your life a lot easier:

• Keep copies and organise them – getting into this habit will save you a lot of hassle later on. Keep your copies organised according to client and month. 
• Include all possible payment methods – give your clients every possible option to pay you so there’s no excuse for late payments. 
• Invoice as soon as possible – most businesses allow a period of time before clients have to pay, but that doesn’t mean you can’t invoice them immediately to ensure a quicker payment. 
• Outline your terms – due dates, late fees, business credit, payment methods, and what will happen if the payment doesn’t match the invoice amount. 
• Chase up late payments – In many cases, when clients don’t pay you it’s just an innocent mistake on their part. They might have forgotten to pay, never received the payment due to a change of address, and/or misplaced the invoice due to poor financial management. So don’t worry about chasing up overdue payments. After all, it’s money that you are owed. 

By this, we just mean that your invoices should reflect the actual amount of work that you’ve spent dealing with a client. Don’t feel guilty or shy about charging extra, if indeed you spent extra time on it. 

Your time is valuable, and your pricing should reflect that fact. If the client has concerns, then most of the time a simple explanation will reassure them. 

If you price your service too low the first time, then the client will expect the same every time. Then, when you finally choose to update your prices to include the true cost of your work, the client could be confused, angry, and you could potentially lose their trust. 

It’s better for everyone if you’re honest from day one.

Mixing your personal finances with your business finances is an easy path to confusion. You won’t have a clear picture of your business finances, you’ll end up using your budget on personal expenses, and it’ll be a nightmare when the time comes to categorise expenses for your taxes. 

A separate business account will help you resist the temptation of using business funds for personal transactions (or vice versa) and give you a clear picture of your income and outgoings, making profit and loss projections much easier. 

One of the easiest ways to lose out on money is by forgetting to record business expenses. Business expenses are defined as any money you’ve spent that’s “wholly and exclusively” for the purpose of running your business.

When the time comes to pay income tax, you can deduct any business expenses you’ve made throughout the year from your total to decrease your taxable income. 

Some common business expenses include:

• Office costs: for example, stationery, or phone bills.
• Travel costs: for example fuel, parking, train, or bus fares.
• Clothing expenses: for example purchasing and cleaning uniforms.
• Things you buy to sell on: for example, stock, or raw materials.
• Financial costs: for example, insurance, or bank charges.
• Costs of your business premises: for example, heating, lighting, business rates.
• Advertising or marketing: for example, website costs.
• Training courses related to your business.

Alongside business expenses, you can claim capital allowances too. They work in pretty much the same way but they’re purchases that will be valuable to the business long-term and are one-off expenses like:

• Equipment
• Machinery
• Business vehicles

It sounds simple enough, the tricky part is keeping a detailed note of all your business expenses throughout the year. An app like Countingup makes receipt capture easy and automatically categorises each of your transactions so that you can keep on top of your finances effortlessly everyday.

The simplest way to confidently keep on top of your bookkeeping is with a two-in-one app like Countingup. 

Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

Find out more here.