Okay, so now we're going to talk about doing the accounts. Now, this is not a boring subject, it's very exciting. Because as a business owner, you have a more challenging life. And this is what's so great about running your own web design business. I mean, you can do what you want when you want. At times, it will be difficult, that's for sure.

But on the other hand, you contribute more to the wider economy, and you'll buy other people's goods and services. And later you'll start to employ people and thus increasing demand and employment. So let's get going. So on the other hand, you'll have people being very negative to you, saying negative things about you starting your own web design business. And one of the things I always hear is people saying, it's difficult to set up a company, and it's hard to organize, you end up with receipts everywhere, and have a nightmare every year working on accounts. Now this isn't true at all.

In my experience, it was very easy to set up a company in the UK. I think it cost me a couple of hundred dollars, I think it will probably be very easy in your country as well. And after that I have to supply accounts every year. And this is probably the same in your country to know in order to do the accounting, I do have an accountant and I've always had one since the beginning of my business. So I would advise you to get one it is possible in the UK to do it without an accountant but I have come to rely on my accountant and he doesn't charge me very much and he accepts all my huge great unwieldy Excel files and writes The accounts as a result of them, and I'm very pleased with the arrangement. In fact, I spend only about three or four hours doing the accounts for my business every year.

So it's absolutely untrue that you need to spend time on accounts. So have internet banking, and I'll show you later why that's a good idea. So basically, internet banking is more itemized. And you can copy and paste or download easily into Excel files, which you can then supply to your accountant and from which he can do the accounts. Now you must make sure when you spend money on a business expense, it goes out of your business account. This will make the accounting process easier because the accountant will see that some money has gone to your account and he'll automatically think it's a business expense and that will count against your profits and therefore your pay less tax.

It's not the end To the world, if you do make a business expense on your personal credit card, you just have to remember to tell your accountant about it. And in the same way, you should set up a PayPal account for your business that withdraws directly from your business account as well. And this is very easy, you can have as many PayPal accounts as you want, you just need a different email address for it. And then when you're making a payment, you have to remember to use your business PayPal email address when you're paying for a business expense. And for the same reason you get a credit card for the company. So if you need to buy anything on credit card, then that will be from a separate account too.

So all these things make it easier at the end of the year to add up your expenses. So on the incoming side, this is something you do have to do as the year goes on. It's not like the expenses where you really just have to collect them at the end of the year, but for incomings when you're charging clients, you should keep an account of that As you do it, so the day you invoice the client, you note down the date of the invoice, the invoice number, every invoice should have a number on it, the amount, the name of the person, it's to the client. And you could also include a little line about what the job was for. And I also have a column for notes. And that's handy for when you're charging in a foreign currency.

The reason you do this is because it's very easy to see who has paid and who hasn't paid because you also have a column as you can see, for date paid and when you notice that an invoice has been sent over a month ago and has a blank space in the date paid column, you know that you've got to make a phone call or write an email to the client and inform them that they are late on that invoice. And it's very important you get onto them straightaway and you don't let that linger and you get on to them after a month after the end. voice was sent. So I think it's good idea if I show you an invoice now. So here's an invoice I've just amended and I do have the invoice in InDesign so I can get a nice logo that's in vector so it looks nice and sharp on the screen and prints out well.

Also, I can use a nice fun, so it's much better to do invoices and proposals and contracts in PDFs rather than in word and PDFs that are made from InDesign as well. So obviously I've got my name and address there, and the date of the invoice, my invoice number and the name of the client, the company name and the company address and what it's for, and the total and down the bottom is very important information. So there I've got all the details for my bank accounts and I've got the details if you want to pay me from the UK and If you want to pay me internationally, that's the big and the swift number as well as the I ban number. And also I have those little reminders at the bottom, I put them in my email and everything reminding the client what I do because they might not know that I do SEO as well as websites, etc, etc.

Another thing you could put down in the bottom here is your terms. And you can get this from the internet if you want, but it's aligned basically saying your terms are that the invoice should be paid within 30 days net otherwise interest charges can be added. Now, I've never added interest charges to a late paying invoice because obviously, I'd like to keep on the right side of clients. And as you can see, I don't often put that in the invoice as it may look a little bit aggressive, but it's something you can think about if you have a problem with late paying clients. So moving on then here is an example of My internet banking. So this is my business account.

And you can see that I can just copy and paste this from the internet into an Excel file or you don't actually copy and paste it, you actually export an Excel file from the internet banking site, and you'll get a good itemized bill there. So you can see at the top, the first entry is a payment in and that's client work. So somebody paid one of my invoices, they're directly into the bank account, which is nice, much better than sending checks, which they don't do so much these days. I'm pleased to say the second one is my salary. I pay myself 600 pounds a month. This is a UK thing that if you pay yourself 600 pounds a month, and then the rest you pay yourself in dividends.

So every three months or so you've paid yourself a few thousand pounds. And the reason you do that is because it's better for tax and that's a UK only thing. Next up is a bit of passive income. Next up is an expense. So that's something I bought something with PayPal. And as it was a business expense, and it came straight out of my business account.

So all I've got to do is tell the accountant that that expense was for marketing, and that will come off my profits so I don't have to pay so much tax. And lastly, there's another bit of passive income. So as I say, you can simply copy and paste or download this into an Excel file from your internet banking, bank accounts online, better itemized. And it's easier to note to your accountant, whether withdrawal was for marketing, hosting, outsourcing, or whatever. And you can tell whether a deposit was for client work or passive income. And that's important because the accountant has to show for the client work when the client was billed and When they paid the bill, whereas for passive income, they don't share that information, of course.

So in the UK, this is how I have to do it. And I hope that helps you wherever you are. So back on expenses, now I just want to explain what I claim for as expense. And there's quite a lot here. So what you can do is really just have your revenue with your costs. And that means that your profit will be half of your revenue basically, and you'll only have to pay tax on that half.

So it's really important to put in as much expenses as you can. And these are for any computer or laptop, tablet smartphone, you might buy, of course, website expenses, hosting domain name, stock, images, email management, etc. But it's the general expenses that you can put on that where you can really save money. And that's any sort of travel to see a client proportion Have your telephone use charges you can charge for your use of houses office. So any office stationery or things like that in the UK, there's standard charges, you can take off your profit for the use of houses office. Broadband, of course will be a business expense and anything you use for your company basically.

So stationery courses, books, anything like that can be used as a legitimate expense for your business. So I don't mean to say it's so simple and it's not hard work. But after a while, I find it really easy. And as I say, I spend very, very few hours every year, maybe two or three hours every year on accounting, but it's different in different countries. So keep that in mind. But there's also some other things that you should consider as well.

You should consider purchasing some sort of insurance to cover you against acts of God. Like injury, etc. Maybe think of this later, not when you're just starting out. But if you plan to work for yourself and be an entrepreneur for the rest of your life, then you should have a personal pension, of course. And if you're from the US, you'll need private medical insurance. And the general financial point is to keep large surpluses in your personal and your business bank account.

And this is to prepare you against the feast and famine. That is the life of a business owner. So sometimes you'll make a lot of money. And some months, I'm afraid you'll hardly make any money. So you've got to have these thousands and thousands of dollars in your accounts. And similarly, you need a lot of money to start up in business.

Now some people say it's three months worth some people say six months worth, but I'll leave it to you the amount but of course, it's going to be some considerable amount of money that will tie to you For a few months, and you need to decide how much that is. Okay, I hope you like that lecture on accounting. My name is Rob from Rob cabin.com. Of course, I'll see you in the next lecture.