Admin. It’s an inevitable part of the contractor’s life. But the administrative load that’s required of you can be overwhelming. To help you manage your workload and the paperwork that’s required to keep your business going, we’ve created a guide to getting it done as quickly and efficiently as possible.
Broadly, your workload is split into two categories:
● Keeping records from jobs already underway/completed;
● Keeping track of future opportunities
If you work under an umbrella company, you’ve already made your life a lot easier. Your tax and national insurance is taken off your weekly wage, so you don’t have to worry about calculating your tax return, appeasing HMRC or avoiding IR35. You’re also classed as an employee so you won’t be eligible to claim things like travel and food as expenses, which means you don’t have to keep records of everything you’re spending.
If you run a limited company, everything below applies to you. Many contractors hire accountants to manage the bulk of their financials but it’s still important that your records are as clean and well-packaged as possible so they don’t have the task of wrangling your receipts into order.
Keeping records from jobs already underway/completed
HMRC requires contractors to keep and archive scrupulous records for a minimum of six years, so you’ll need an auditable system for keeping track of all your expenses, profits and losses.
● Corporation tax
● VAT expenses if you’re registered
● IR35 information, if applicable
● Assignment contracts
● Any official documentation a client asks you to sign
● Copies of previous tax return documentation
That’s a lot of paperwork! Obviously, the best way to ensure the safety and accessibility of your records is to keep everything digital. You can use free cloud storage on Google or Dropbox to keep everything indexed and easily recalled but there are also other paid software options available.
The obvious pitfall to avoid is either keeping your records solely on paper, where they can be lost or destroyed, or going to the trouble of digitising everything, only to store all the information solely on your business computer. If your computer broke down or your office was compromised by fire or flood, you’d be a lot of trouble: embrace the cloud.
How to organise your business records
The first thing to do is create a workflow that makes sense to you. Fortunately, there’s never been a better time to be a contractor as there are a wealth of apps and programs designed to make your personal record keeping easier.
Income and Corporation Tax
As your hard-earned money enters your business account, you need to funnel it to the right places. The first thing to do is put aside enough money for tax and national insurance. The rates you pay for these depend on many complex factors, so use a tax calculator, or, even better, consult your accountant as to how much you should be saving.
You have nine months to pay your taxes after your return is filed, so you can factor that into your timeframe. Transfer monies put aside for tax/national insurance/student loans to a business savings account and record the amounts on a cloud-based spreadsheet.
Expenses & VAT
Next, you can take care of any ad hoc business expenses. This could mean purchasing work equipment, like a new laptop, for example. Record all money out, including VAT on products, if you’re registered for it, as you can claim this back. Put all digital receipts in a dedicated folder, separated out into each month of the financial year.
As for your food and travel expenses, you can keep an ongoing digital record of any paper receipts by using an app like Xpenditure, where you can photograph everything on your phone. It even integrates with accounting software like Sage and Xero so it can save you even more time.
Invoices and timesheets
As you send out invoices, you should always keep a copy for yourself, assigning each one a unique PO number so that amounts are easily tracked when you or your accountant are perusing the accounts. You should also keep a spreadsheet that keeps track of each invoice issued and its payment status, so you know which ones you need to chase.
Apps like Invoicely, KashFlow and Quick Books can help you make quick, professional invoices, and, if you opt for a paid service, even assist you with tracking their progress.
If you work away from the client’s office, you will often have to account for your time and a free app like Toggl helps you keep on track and records the precise amount of time you spend on a project.
Assignment contracts and any official documents
Upload these to your cloud storage, filed by date and client for ease of accessibility. If HMRC questions your IR35 status, having these documents easily to hand will help you plead your case more effectively.
Once all your business expenses have been accounted for, it’s time to pay yourself a salary. Choose a regular payment time and transfer the appropriate amount from your business to your personal account, plus any dividends. Record the precise figures. This process holds true for any subcontractors you employ, although their tax status will determine how in-depth you have to be in your documentation.
Keeping track of future opportunities
This step is all about automation. Obviously you’ve signed up to a million jobs boards and are getting email alerts about possible gigs. The key is to be systematic about the way you approach them. If you want to follow-up on a lead either do it immediately or use a system to denote that further action needs to be taken (you can use colour coding, flagging or starring, for example).
Once you’ve gone through all your alerts and worked out your best prospects, it’s time to craft a CV and send it off.
Having applied for your chosen assignments, you can create an alert in your email application or phone to remind you to follow up the next day with the prospective client or agency.
Looking for contracting work, like any sales-based business transaction, is purely a numbers game. Persistence is key and good processes underpin persistence. Once you work out your workflow, everything will suddenly be a whole lot smoother.