How to Track Income and Expenses

Are you someone who looks at your business accounting and thinks, ‘I can’t do this!’? Maybe you’re not great at Maths or the idea of bookkeeping makes your head spin. Either way, setting up a new business as a sole trader means that you are also the boss of your own payroll department. Therefore, it’s important to stay on top of your business finances, despite everything else you have to do. How to track your income and expenses isn’t as difficult as it first might sound. To help you understand this vital aspect of any business structure and use a bookkeeping spreadsheet, read on to find out more.

Find the time

This might seem an obvious bit of advice, but finding a regular time to go through your income and self-employed expenses will be an enormous help in the long run. Choose a routine that works for you, either weekly or monthly, or both, and more importantly, stick to it! It may not be something that we can master immediately and it takes practice, but improving on your accounting skills means a healthy financial journey for your future business.

Use a Spreadsheet

The easiest and simplest way to track your income and expenses is to use a spreadsheet tracker. To help you, I’ve created a Sole Trader Bookkeeping Spreadsheet. Here, you can track your income and expenses and how much tax you owe. This will make it easier to fill in your self-assessment tax return by using just one bookkeeping spreadsheet! Simply enter the numbers and it will automatically calculate your income, expenses and taxes. I’ve made it customisable so it will figure out the numbers specific to your business. Plus, it uses Excel or Google Sheets which means you don’t need to buy any expensive software.

Create a budget

When thinking of self-employed business accounting, especially for the first time, the first thing you should do is create a clear budget. By doing this, you are establishing your financial goals for your business. Using a spreadsheet will enable you to see what you’re actually doing with your money. In contrast to when you have a payslip from an employer, running a self-employed business means that you’re the one in control of what goes in and out from your business bank account

Step 1: Track your earnings

As most small business owners will agree, trying to calculate monthly earnings can fluctuate hugely. Therefore, tracking your business income, particularly if it’s an irregular income, is critical to know how much you can spend on expenses and unforeseen extras. If possible, try and calculate an average monthly income and adjust it accordingly. 

Step 2: Track your expenses

Avoid having to frantically go through all your receipts and bills just before the end of the financial year and start making regular entries on the spreadsheet tracker. Alternatively, HMRC simplified expenses make claiming allowable business expenses easier for the self-employed using a flat rate, without the need to keep receipts.

Overall, your expenses might be split into fixed costs such as:

  • Rent
  • Web hosting

And, variable business costs that could include:

  • Equipment
  • Marketing

If money is coming out of your business account, then every single expenditure should be tracked. You can find more in depth information about creating a business budget here.

Why should I track my income and expenses?

Staying on top of your tax bill means there’s no panic at the end of the financial year. Therefore, a bookkeeping spreadsheet tracker helps you be ready to file your tax return. No one wants to pay too little or certainly, too much in taxes! So, by tracking every penny you make and spend in one easy place means you’ll have an accurate account of all your business finances. It also means that you won’t be relying on your own memory when it comes to completing your tax return! Rather, a spreadsheet will automatically update your income and expenses for you. In addition, tracking your business finances can help you see where you’re wasting money, or using it efficiently, so you can make amendments to spend your money more wisely.

When it comes to running a business, many people put their finances at the bottom of the to-do-list pile. However, prioritising your budget on a weekly or monthly basis will ensure you don’t fall behind with money managment during the year.


About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek and money nerd helping financial DIY-ers organise their money so they can hit their goals quicker.