5 top tips to organise your company costs and expenses

Working as a contractor may be new to you, or it may be something that you have been doing for a while. Whatever stage of the contractor life-cycle you’re in, there are some things that are good to be reminded of everyone now and again. We think one of these is keeping your limited company expenses and costs organised.

To help you keep everything ‘ship-shape’, here are our 5 top tips for organising your costs and expenses.

1. Know your responsibility as a limited company director

If you are new to contracting, you will have to get used to a new way of working. As a contractor working through your own limited company, you will be working, and you will also have the added responsibility of making sure the company is run correctly.

As a limited company is a separate legal entity, it needs to have its own business bank account. Whilst, there is no law that directly states this is necessary. HMRC and accountants strongly recommend that you set up a bank account for your limited company as it keeps your personal and business expenses separate and it will make it easier for you to calculate your tax liability.

2. Open a business account

How do you open a business bank account? There are a few ways you can do this. Opening a business bank account can sometimes be done online. Sometimes it will be necessary to visit the nearest branch of your chosen bank and present them with your incorporation documentation and some personal identification.

It is also a good idea to open a separate deposit account which can be used to put aside money for VAT and Corporation Tax.  At SG, we can help you set up a business bank account fast and without having to go into a branch.

3. Keep your bank accounts separate

To prevent your business and personal expenses becoming mixed up – and to keep HMRC and your accountant happy! – it is best practice to keep your business and personal expenses and costs separate. The simplest way to do this is to put all your business expenses through the business account and all your personal expenses through your personal account.

We understand that there may be times when it is necessary to put a business expense through your personal bank account. You can reclaim this cost in a similar way as you would when claiming an expense from an employer.

4. Learn how to make an expense claim

Making an expense claim against your limited company is relatively simple. To make an expense claim you must note the details of the claim on a piece of paper and attach to this the receipt for the expense. Then, you transfer the total from your business account to your personal account.

The expense claim must be stored in your company records.

5. Cloud accounting and expenses

Cloud accounting has made keeping track of costs and expenses and receipts that much easier. Most cloud accounting software packages are supplied with a smartphone app that enables you to upload details of your expenses and images of receipts straight to the cloud. This reduces the risk of your receipts becoming lost or damaged.

If you prefer to keep physical copies of your receipts we recommend that you:

• Store them by date
• Store them by type
• Keep them stored in a secure place
• Store them carefully so they don’t become ripped or damaged.

Top tip: Our most important tip is that you claim for all business expenses you incur, even the smallest. It may seem like a waste of time claiming for something that costs a couple of points, but if you did this with everything you could soon find yourself out of pocket for a considerable amount of money.

What can I claim as a business expense?

For details on what is classed as an allowable business expense please read our article ‘Ask an Expert: What you need to know about expenses.’