As a childminder you are classed as self-employed and as such it is important for you to know about the financial side of running a small business. Many people are worried about the paperwork involved in running a business and it is vital that you organise your accounts in a professional way. In this chapter we will look at the important issues surrounding accounts for small businesses.
Your Responsibilities
Working as a ‘self-employed’ childminder means that you are not actually employed by the parents of the children you care for, and as such you are responsible for your own income tax and national insurance payments. You are contracted to the parents at a rate agreed by both parties. As you do not actually work for anyone you have sole responsibility for the following:
- Maintaining accurate, up-to-date, financial records which show your income and expenditure.
- Paying for insurance to cover yourself, your home and your car.
- Obtaining legal and public liability insurance.
- Paying income tax and national insurance contributions for yourself.
Keeping The Tax Office Informed
It is important that you inform your local tax office that you are a registered childminder and that you are earning an income working from home. You must provide this information regardless of whether you are earning sufficient money to pay tax or not. If you are not liable to
pay tax, you must still keep accurate records to ensure that you are in a position to prove your income and expenditure should this be necessary.
Small businesses, including childminders, with a turnover of less than
£ 15,000 per annum are not required by law to employ the services of an accountant. However, the Inland Revenue will require you to supply details of your:
- total income for the year;
- total expenditure for the year;
- net profit for the year.
Self-Assessment
The rules for self-assessment require you to:
- Inform the Inland Revenue that you are working.
- Ensure that you have an organised system for keeping accurate records.
- Keep these records up to date.
- Retain these records for six years.
Your records must include details of any money you have received for your work as a childminder, together with any money you have spent in relation to your business. It is, of course, entirely up to you how you decide to keep your accounts. There is no set way, and it is very much a matter of personal preference.
Keeping On Top Of Things
However, what you must make sure is that your records are accurate and up to date. I can not stress enough how important it is to do your accounts on a
weekly or
monthly basis. This avoids a backlog in accounts and ensures that income and expenditure is logged when it is still fresh in your mind and receipts are to hand.
Many people choose to set up their accounts on a personal computer and there are many suitable computer software programs available. However, if you prefer to have handwritten accounts these too are perfectly acceptable and an accounts book with pre-printed columns can be bought from many high street stores. Accounts books can also be purchased from the National Childminding Association and these are straightforward and easy to understand.
How To Keep Your Accounts
The example shown on page 98 is one way of setting out income and expenditure. The trick is to find a method that works for you and to be disciplined when completing your accounts. Set aside some time, say once a week or once a month, when you can devote yourself to getting your accounts up to date. By being organised you will save yourself a lot of hassle in the long run.
Make sure you keep all your receipts and number these. You can then write the number of the receipt next to the item it relates to on your account sheet so that you can see easily which receipt matches which expense. It is a good idea to either staple the receipts to the appropriate page of your accounts or keep them in numerical order in a separate folder.
As I have mentioned before the way you set out your accounts is entirely up to you. Look for a method of recording your earnings and expenses which works for you and which you find easy to use.
Here is an example of what your income and expenditure sheets might look like:
By adding up the figures in each of the columns headed amount you will be able to see, at a glance, how much money you have received for the month and how much money you have spent.
If you choose to set up your own accounts system, it is important that you are accurate and that you are aware of the items which the Inland Revenue will allow you to set against your tax liability.