It’s a few weeks since the self-assessment deadline, and the pain and worry of meeting it is receding into the past. But there’s another tax return to be done next year!

It’s very tempting to tuck your tax return out of sight in a deep dark corner of your mind, try to forget about it, and not do any preparation for it  – like not keeping any records at all.

But if you do that, for 11 months your undone record-keeping will squat there like a little goblin, chuckling evilly to itself, sucking up your energy, and every so often knocking on the door of your brain.

You won’t be able to forget completely that it’s there, and when you’re finally forced to open the door and let it out next January, it’ll have turned into a giant ogre – huge, scary and wielding an enormous club!

And it’ll take you much more time to squish the ogre than it would have done to squish the goblin!

To stop the goblin turning into an ogre, keep him in the daylight and make record-keeping part of your daily routine!

It can be enjoyable if you keep on top of it and don’t worry about it.  No, honestly.  I’m not telling a fairy tale here.  I have heard that from FreeAgent customers.

Bring the goblin out into the open and you’ll discover he’s actually not that scary!

Here’s how to do that.

Organise your paperwork

Is your way of dealing with paperwork - receipts, invoices, bank statements and the like – to bundle them all into a large box, or bag, in no kind of order, and leave them until January?

There’s no hard-and-fast rules for how to keep your books when you’re in business, but you do legally have to make sure you keep good records, or HM Revenue can fine you.

Here are my tips for how, as an accountant, I’ve seen my clients keep their books.

Head down to your local stationer’s and invest in about 10 lever-arch files (don’t bother with ring-binders unless your business has very few transactions, they’re far too small) and sets of file dividers.

Have a separate lever-arch file for each of the following:

• Copies of invoices you issue to your customers – if you print these out.
• Receipts and invoices your suppliers gave you.
• Receipts for business expenses you paid for yourself.
• Bank statements.
• Copies of VAT returns you filed with HM Revenue – if you print these out.
• Copies of tax paperwork such as notices to complete tax returns.
• Any other paperwork you may have.

Sort each of these files so that you can easily find any different piece of paper you want to.

Some people like to sort their paperwork by date only, others by date and supplier / customer name. For bank statements, I would recommend a different section of the file for each different bank account your business has.

But sorting your paperwork will only take you so far.  You’ve turned the handle on the door behind which the goblin is hiding.  But you need to open the door, drag him out and confront him.

And the way to do that is to...

Write up your records regularly

Does that mean you have to buy a cash book from the stationer’s too and write up every receipt in there? Not if that doesn’t suit your business.

Some people, whose businesses have very few transactions, manage well by using a hand-written cashbook, or a spreadsheet, to write up their records.

But once your business gets beyond about 5-10 different transactions a month, it really is worth your while to start using a package such as FreeAgent to keep your records. These packages can help you generate invoices as you go, so that you have regular money coming in from your customers. They’ll also help you handle cash going in and out of your bank account. And you might even enjoy using them!

And using a package such as FreeAgent won’t only help you avoid turning the self-assessment goblin into an ogre. By regularly updating your records, you’ll get to know your business much better and you will be well prepared for self-assessment.

This will give you more insight into your business and more control over it, and reduce your stress levels.  No longer will the goblin be squatting in a dark corner of your mind, cackling to himself and growing bigger every day, feeding on your energy.

When you have proper financial information at your fingertips about your business, filling in your self-assessment tax return becomes much more straightforward.

No, honest!

Emily Coltman, Chief Accountant at FreeAgent