You’ve set up your sole trader business but are not entirely sure what you need to do to keep your accounts, books & records in order. The first step is to ensure you have a bookkeeping process in place.

What is Sole Trader Bookkeeping?

Bookkeeping is the process of recording & organising all the accounting and financial records related to your business.

Financial records include:

Payroll documents (payslips, gross-to-net reports)
Any purchases made by the business, with their invoices
Bank statements
Stock reports
Sales invoices you issued to your customers
Loan statements
Insurance documents
Lease agreements

As a rule of thumb, any document which supports or validates money in or money out of your small business is considered to be a “financial record” and in line with the legal requirement to maintain proper sole trader bookkeeping, these records should be organised and retained on file (for a period of at least 6 years). Record keeping is slightly different between sole traders and limited companies.

See our Guide to Form 11 Tax Return as well.

What is the difference between Bookkeeping and Accounting?

Bookkeeping is different to accounting. Bookkeeping is the recording & organisation of financial information and forms the basis of your sole trader accounts, which in turn forms the basis of your annual tax return. Whereas accounting is the review, analysis and reporting on the financial information to ensure businesses remain compliant with accounting & tax rules, and to help sole trader businesses make better decisions by interpreting their financial information and self-assessment.

Should I manually prepare my books or use a software?

There are two broad options for how you choose to do your sole trader bookkeeping: digital or paper.

A physical book, excel workbooks, or cloud accounting software are all options for your bookkeeping system. The choice will be dependant on your business. If you are a limited company and receive a lot of invoices an accounting software package may be of more benefit than an excel workbook.

In this day of technology it can be easier to have a digital copy – it will mean information is easier to retrieve if needs be, you will be able to run reports on your information at the click of a button and it will also help to keep down any accounting costs (if you are outsourcing these) for sole traders. If the information is given in a neat and easy to retrieve fashion, it will significantly reduce the time spent by your accountant, and will therefore save you on fees in the end.

If you are receiving paper invoices you may wish to keep a hard copy but scan a copy into your digital process. Many of the cloud accounting packages now use smart technology that will automatically “read” any invoices that you scan into it – thus saving you time on manual data entry.

7 Tips for Good Bookkeeping

1. Keep your business and personal bank accounts separate.

When you are setting up an online business, set up a business account. This will ensure you can easily see any tax detectable you have and allow your small business to build up to its own credit rating. It’s really beneficial to keep your self-employed account from your personal one separate.

2. Automate what you can.

If you use Xero cloud accounting software or similar, you will easily be able to see the numbers you need. Sole traders can sync business bank account to software and have up-to-date information. Bookkeeping automation will save you untold minutes and headaches.

3. Check on your bookkeeping regularly.

Ideally, self-employed would set up a scheduled time or day in the week/two weeks to see where their books are. This will enable you to keep up with any money owed to you or by you. You will keep any unpaid fees down as a result. You can also chase up any unpaid invoices quickly.

4. Keep a record of your business expenses.

The tax laws in Ireland change often and if you have these recorded you or your accountant can easily determine what you can use as a tax deduction or not. It’s definitely worth recording your business expenses to save money by filling out all expenses in a tax return in every tax year.

5. Monitor your employees time with time tracking software.

Cloud-based time tracking software allows your employees to clock in and out on their smartphones, tablet, or laptops easily and hassle-free. There is software for just about any industry, it will enable you to easily keep track of overtime, or flexible working hours. This makes payroll a doddle!

6. Stay aware of tax deadlines.

If you set up alerts for the tax deadline for self-employed you won’t be caught unaware and will know when you have the bill ready to exit your account. Keep in mind that the tax year is different in each country.

7. Ask!

If you ask your accountant or a financial planner for help you will have access to a trove of information. Get in touch with SCK group and we can guide you on how to use the cloud accounting software and will provide an instruction tutorial when you first set it up. We can also help if you need to customise the software to better suit your needs or if you need any help with tax returns. We are more than happy to help you with any business queries you have whether you are self-employed or not, you only need to be an expert in your field!

How an Accountant Can Help

Essential bookkeeping will enable you to have an excellent idea of where your business is vs the budget. You can easily see where you are owed or owing money.

Therefore it is really important for every business – small and large – or sole trader to have an up-to-date bookkeeping process. The easiest way is to achieve this is to have a process or routine you do every week or month to keep your records in order – consider using – cloud accounting software Xero .

You can do this yourself or outsource it & we will be glad to help you should you have any questions.