Sorry if this has been addressed elsewhere - I have searched but not found an answer that helps. I’m a part-time freelancer… (sole trader) with a 0.5 PAYE job as well. I have until now kept a simple spreadsheet of expenses and use a basic invoice creation package for the freelance work. Now I have decided to take the plunge start to get a handle on the concept of double entry systems and at the same time put everything on QF, running the two in tandem for the remains of this financial year in case I make blunders. However it is not as easy as I thought ! I do have a separate account for business income but I pay everything out of my personal account, taking amounts as needed from the business one to top up the personal one. I am at a loss to know how to deal with this so the figures all add up in QF and the expenses are properly shown in QF.
Is the right thing to do to split up the arbitrary sums that I take as “drawings” into reimbursement for expenses and private drawings? If so how do I link them to the receipts? Or do I put such amounts in petty cash and treat it as if I had paid cash for the items? If I do that, I assume I have to add a transaction to top up petty cash and another to “pay” for things from it? Sorry to be so dense! I just want to understand it properly rather than just enter stuff blindly as then I will make fewer errors!
If you have a business account then why are you paying for things out of your personal account and reimbursing yourself? The whole point of having a business account is so that you don’t have to do this and then things become much much simpler to manage.
I can’t buy things from a business account. This is because it started as such a small concern that I was advised I did not need a full expensive business account, but I decided to at least separate the income from my PAYE income by using an account that is an online only facility alongside my personal current account. I can accept BACS payments into this account and can make online payments out of it but that is all. Hence I need some way for now to officially reimburse myself for what I spend. I want to do it in the right way as I set things going on QF, so that when I do get a proper business account in future, it will be a seamless change. I also always foresee situations such as where I buy stationery bits in a grocery shop and need to reimburse myself for them or find myself out with only personal bank cards. Hope that makes sense. Am just trying to get it right from the outset not try to correct it later
What you would need to do is have your business account and personal account listed on QuickFile. From the personal account you’re only interested in those items relating to your business. If there are few such items just enter them manually, otherwise you may need to do it the other way around and import all personal items (from a CSV file) then delete those that are nothing to do with the business. Whatever transactions are left in that account just tag them to invoices or nominal codes as you would for any other account.
Going forward it really makes the accounting simpler if you can isolate all your sole-trader activity to one bank account. But not to worry, strictly speaking the business account and personal account are both in your name anyway. It just negates the requirement to exclude those personal transactions from your statement, which can take time.
Thank you so much for your responses Glenn. Ok, what I’ve decided to do for the time being is to create a business-expenses bank account - a “dummy” account really but I think it will serve the purpose. I can then add receipts/invoices I owe to the system and have them paid for from that expenses account. The business can then make payments into that account to clear it, thus reimbursing me. I should also be able to put in things which are part paid by business and part paid by private because they are shared use, like the cost of business phone calls within the phone bill. I hope that makes sense and there isn’t something I have not thought of. The only thing is I am not sure what type of account it should be. I am feeling a Loan Account, as it is technically the case that I am loaning the business my personal money for things until reimbursed. I’ve created one and where it asked for account/sort code I just put in zeroes which it accepted. I just wanted to ask if this seems ok before I start actually using it. If not, which other type is better? Petty cash doesn’t seem right as some amounts are bigger than you’d expect from petty cash of course. I’ll get there… got to endure the learning curve on the way which is why I’m carrying on my current system as my primary one while I learn so I don’t make disastrous mistakes.
It sounds like that would work! Although it’s always worth checking with a qualified accountant first.
A “Loan account” would be ideal for this setup. Although to be honest they all pretty much do the same thing, but yes loan account tends to be used in these circumstances. You shouldn’t need to enter any sort-code or account numbers, I don’t believe they are mandatory fields so you can just leave them blank.
