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If you’re self-employed, managing your accounts and keeping track of your taxes isn’t always easy. After all, you’re probably on your own when it comes to essential administration. The good news is that QuickBooks Self-EmployedOpens a new window is an online accountancy software that takes the sting out of bookkeeping.
Cheap, simple to use, and available in desktop and mobile versions, QuickBooks Self-Employed allows you to manage your accountsOpens a new window as you go. Create invoices, record payments, reconcile bank accounts, and create detailed profit and loss reports — all within a single, user-friendly interface.
While using this intuitive software is relatively straightforward, you need to know you’re using the system correctly if you want accurate accounts at the end of the year.
Managing Transactions in QuickBooks
QuickBooks Self-EmployedOpens a new window is a cash-based system, so you have to manually enter each expense and payment you receive. While this might sound like hard work, it really isn’t. Adding each transaction takes seconds, and you can even scan or upload receipts and invoices to support each record.
To add a new transaction, click the “Transactions†link on the left-hand side of the page, and select the “Add transaction†link on the top right. Select the type of transaction, which will usually be either a business expense or business income. You can then enter a description, a total and a transaction category. Choose “Business Income†if you want to record a payment you’ve received, or select from the range of expense categories available.
Once you’ve saved the record, your income total will update on the home page. You should also find that your profit and loss report has been updated, too.
Tracking Mileage
Business mileage is an important, tax-deductible expense — which often isn’t recorded in the correct way. However, if you’re not claiming for legitimate transport expenses that are critical to your business, you could end up paying more tax than you need to. Fortunately, QuickBooks Self-Employed makes the process easy.
Both the mobile app and the desktop software give you the option of entering your business trips manually. However, you’ll need to add your start and end address. QuickBooks calculates the miles traveled, and depending on your tax profile, it will calculate your deductible mileage expenses.
Alternatively, you can choose to use the automatic mileage tracking option. The auto-tracking function relies on a mobile app. When you start a journey, simply swipe and drive. Your location, your final destination and the number of miles you travel will be calculated and applied to your account.
QuickBooks and Taxation
QuickBooksOpens a new window allows you to create your own tax profile that contains all necessary information required to calculate your annual tax bill. In the UK, for example, you must enter whether you’re married or single, and what your personal tax-free allowance is. The tax summary screen displays all relevant income and expenses, and it lists your tax liabilities at the bottom of the page. This should be all that you need to complete an online tax return.
Reporting: Tax Summary, Profit and Loss, and More
The report page provides both your tax summary and a list of your current tax details. It is essential that your tax information is correct and up to date — otherwise your tax liabilities might be calculated incorrectly.
This is also where you will find your “Profit and Loss†report, which is a detailed breakdown of your income, expenses, assets, liabilities and profit. You can choose to view the report for the current tax year, the previous tax year, by month or for the last quarter. Your turnover and any other income appears at the top of the page, while expenses by category are listed underneath. The “Net Income†figure is, ostensibly, your taxable profit.
Handling Invoices Inside QuickBooks
The invoice section of QuickBooks Self-Employed is great for keeping track of who has paid you and which bills are still outstanding. However, it’s important to note that settled invoices don’t carry over to your tax summary and profit and loss report automatically. Once you’ve marked an invoice as “Paid,†you will still need to create a new transaction for the amount.
To create a new invoice, simply click “Create invoice†at the top of the screen. At the top of the invoice page you will see a box labeled “Client name.†If this is the first time you’ve invoiced this particular client, you can enter their full name and contact details, along with an email address. However, if you’re sending an invoice to an existing client, their details should autocomplete in the box.
Click the “Add work,†link in the description box, and enter the details of the job. You can choose to set a flat rate or an hourly rate. Enter a cash value, and click “Add to invoice.†Enter your preferred payment details in the box provided, and if you’re happy that everything is correct, click the “Send invoice†link at the bottom right of the page. You can also choose to save the invoice as a draft.
When you receive payment, go to the main invoices page, and click “Mark as paid.†The status link should change color from gray to green.
Being self-employed doesn’t leave too much spare time for admin and accounts. But you can make things a lot easier for yourself by using a comprehensive accounting software package such as QuickBooks.