Running a freelance consultancy is rewarding — and chaotic. Early on I learned the hard way that tidy bookkeeping isn't just about compliance; it’s what lets you see where your business is going, price services correctly and avoid last-minute panics at tax time. Below I share the practical, step-by-step approach I use with consultants who are growing from a side-hustle into a sustainable business. It’s written as if I’m sitting next to you, walking through the exact choices and routines that keep the numbers under control.
Decide on the right business structure (and set it up properly)
Before you log your first invoice, make sure your business structure is correct. As a freelancer in the UK you’ll typically choose one of three options: sole trader, partnership or limited company. Each has different tax, filing and bookkeeping implications.
From a bookkeeping perspective:
Pro tip: set this up before you start trading (or very soon after). Wrong structure means different reporting requirements and more work later to correct records.
Open a dedicated business bank account
Mixing personal and business transactions is the fastest way to create bookkeeping headaches. Open a dedicated current account (or a separate account within your existing bank) the moment you begin taking clients. I recommend choosing a bank or fintech that integrates well with accounting software — for example, Starling, Tide or Revolut all offer easy transaction downloads and open banking feeds.
Create a simple chart of accounts that fits consultancy work
You don’t need a complicated chart of accounts. Keep categories that reflect the way you run the business:
Use these consistently. If you’re using software like Xero, QuickBooks or FreeAgent, customise the default chart to include the above so your management reports are useful.
Choose bookkeeping software and set it up properly
My go-to recommendation for growing consultants is to pick one cloud accounting package and stick with it. The common choices are:
When setting up, do these things straight away:
Invoice like your cashflow depends on it — because it does
Clear invoicing reduces payment delays. I tell every consultant I work with:
For recurring work, set up recurring invoices or retainers and reconcile them monthly so incoming money is predictable.
Keep receipts, subsistence and mileage organised
HMRC expects that expenses are evidenced. I recommend a two-part system:
Doing this in real time saves hours later and protects your allowable expense claims.
Reconcile and review weekly
Make reconciliation a weekly habit. Reconcile bank transactions to invoices and expense receipts so your bookkeeping is never more than a few days out of date. This takes 15–30 minutes a week for many consultants and prevents long catch-up sessions later.
When reconciling, look for:
Manage VAT and taxes from day one
If you expect to exceed the VAT threshold, register early and choose a VAT scheme that suits cashflow. For consultants, the Flat Rate Scheme can be attractive but compare the effective rates by sector. MTD for VAT is mandatory for most VAT-registered businesses — ensure your software is MTD-compatible.
Plan for taxes:
Monthly management routine (my checklist)
| Task | Why it matters |
|---|---|
| Reconcile bank transactions | Keeps books up-to-date and spotting issues early |
| Review aged receivables | Chase late invoices before they impact cashflow |
| Record and attach receipts | Evidence for expenses and VAT claims |
| Run profit & loss and cashflow report | Check performance and plan for upcoming bills |
| Move tax money to a savings account | Prevent surprises at year-end |
Use simple cashflow forecasting
I build a three-month rolling cashflow forecast for every client who’s scaling. It doesn’t need to be fancy — list expected income (confirmed and pipeline) and fixed/variable outgoings. This quick view helps you decide whether to take on that subcontractor or delay marketing spend. Free templates in Excel or the cashflow modules in Xero/QuickBooks will do the job early on.
When to bring in help
You don’t have to do everything yourself. I recommend engaging an accountant when any of the following apply:
An accountant can tidy historical records, set up bookkeeping processes and give strategic advice. I often act as the bridge between freelancer and HMRC — saving time and reducing risk.
Common mistakes I see — and how to avoid them
From years of advising freelancers, these errors come up repeatedly:
Fix these early and you’ll save hours (and stress) each month.
Tools I recommend
Pick one tool for each function and make them talk to each other — integrations are the real time-saver.
If you follow these steps, you’ll have a bookkeeping system that scales with your consultancy: tidy, compliant and genuinely useful for decision-making rather than just an annual chore. If you want, I can share a starter spreadsheet template (chart of accounts + monthly checklist) or walk through setting up Xero or QuickBooks specifically for your consultancy — just tell me which tools you’re using and where you’re getting stuck.
