Open your cutlery drawer and check: do you place the tablespoons first, or do they follow the knives and forks? (Or perhaps it’s forks and knives?)
Personal preference dictates organization. What seems elegantly streamlined to one person may appear unconscionably chaotic to another. However, in self-employment, inefficiency is not an option.
You must organize and maintain receipts for taxes, expenses, invoices, and business documentation to ensure your business’s overall health. Poor bookkeeping has driven more companies out of business than we’d like to admit.
So, if organizing and maintaining your tax receipts efficiently challenges you, consider these industry insights to improve your bookkeeping skills.
What tax receipts and records do you need to keep?
Let’s first clarify the documents you need to keep before diving into how to organize your tax receipts:
- Keep all information related to sales and income.
- Maintain a record of every business expense you plan to claim.
- Store all VAT records if you’re VAT registered.
- Keep PAYE records if you have employees.
- Hold onto all personal income records.
- Preserve records related to the Self-Employed Income Support Scheme (SEISS), especially if you claimed this grant during the COVID-19 pandemic.
HMRC advises keeping these documents for at least five years after submitting your last Self Assessment. For instance, you should retain all documents for your January 2024 Self Assessment until at least January 2029.
Considering this, managing and maintaining such a vast amount of tax information becomes a significant task. So, how do you best organize and maintain these crucial business documents?
How do you organize receipts and expenses?
Now, let’s address the main question: how do you effectively organize your tax receipts and documentation?
Honestly, there isn’t a universal solution, but you can adopt a series of sensible habits and even follow legal frameworks to simplify the process.
Adopt a Routine
Adopting a routine is crucial for organizing your business receipts. You might choose to organize your documents by date, client, category, or even paper color, but the key lies in being consistent.
Your routine should fit your schedule and preferences. Perhaps you prefer tackling bookkeeping at 9 am to start your day positively, or you might save it as the last task before wrapping up for dinner.
If sorting through business receipts daily seems daunting, consider setting aside time on Monday mornings or Friday afternoons for a weekly session.
Choose a rhythm that you can maintain consistently, as nothing hinders effective bookkeeping more than inconsistency.
Maintain Digital Copies
Under HMRC’s Making Tax Digital scheme, legally, you must file certain taxes and keep specific records digitally.
If you’re new to self-employment, it’s wise to start storing your receipts and filing taxes digitally right away. For those more experienced and reluctant to change, begin transitioning soon, as the option to delay won’t last forever.
If you haven’t already, we strongly advise signing up for online bookkeeping software to get your records digital as soon as possible.
Maintain Paper Copies
The classic image of bookkeeping involves piles of dusty boxes and papers scattered across the floor. While stuffing receipts into the nearest drawer might feel convenient and satisfying, it can cause problems during tax season.
If you opt to keep paper copies (having a backup plan is always wise), consider storing your receipts in binders or folders. Organize them by tax year, and then further divide them into categories like expenses, tax receipts, and invoices.
Your categorization preferences matter, but ensure they pass the ‘fresh eyes’ test: if you handed the binder to a friend unfamiliar with it and asked them to find a specific document, how quickly could they locate it?
In summary, effective organization of tax receipts and business documents is essential for successful self-employment. Embracing digital record-keeping, maintaining orderly paper copies, and establishing a consistent routine are key to efficient bookkeeping. These practices ensure compliance with legal requirements and contribute to the financial health of your business.
If you want to completely eliminate bookkeeping stress, reach out to our team of expert accountants at Count.