FreeAgent for New Founders: What to Set Up First

Lay a clean foundation: start date, business profile, and categories

Your accounting start date is the point from which the software becomes your system of record. Pick a practical date such as the beginning of a month or your trading start date, and gather the statements and records you will need from then on. If you are moving from a spreadsheet or another system, you may need to bring across balances as at the day before your start date so that bank balances, customer amounts due, and supplier amounts owed line up. The aim is to avoid a mix of old and new methods overlapping without a clear cut‑off.

Next, ensure the business profile in the software matches your trading status and basic details. Your name or business name, registered address if applicable, and contact details should appear correctly on documents you send to customers. If you raise invoices, set a numbering scheme you will stick with and add your branding. Consistency here builds trust with customers and makes it easier to match paid invoices to bank entries later.

Finally, look at the income and cost categories you will use most often. Keep them simple at first. Over‑complicated category lists invite inconsistent posting and messy reporting. You can refine later with your accountant. The software’s default categories are generally serviceable; the priority is that you and anyone who helps you understand what each category is for and use it the same way every time.

• Choose a clear accounting start date and stick to it.
• Update your business details so documents show accurate information.
• Decide an invoice numbering format that will not need changing later.
• Keep income and cost categories simple and understandable.
• Bring in opening balances only if you are switching from another system.

Banking and transaction hygiene: import, reconcile, and document

Your bank is the backbone of your bookkeeping. Decide how you will get transactions into FreeAgent reliably: connecting a bank feed if available, or importing statement files on a schedule. Whichever method you choose, consistency beats speed. Importing transactions once a week on the same day is often enough for a small operation. If you use more than one account or a card provider, add each data source so that no business spending slips through the cracks.

Reconciliation is the act of matching each bank entry to its explanation in your books. Some entries will be matched to invoices or bills; others will be posted directly to categories such as software, travel, or sales. Build a habit of reviewing suggested matches and adjusting them where needed. Automation can pre‑fill suggestions, but it cannot understand context the way you can; a few seconds of review prevents misclassifications that accumulate into misleading reports.

Supporting documents matter. For self‑employed record‑keeping, GOV.UK explains what types of records you should keep and the period for which you must keep them. Even if a receipt is small, attach it to the transaction so that, if asked, you can show evidence. The habit of attaching receipts at the point of reconciliation makes your year‑end far easier and reduces time spent searching later.

• Choose a single, reliable method for bank data (feed or file import).
• Reconcile on a regular schedule and review automated matches.
• Attach receipts or other evidence to transactions as you go.
• Create bank accounts in the software for every business account you use.
• Monitor unmatched or unexplained transactions and clear them promptly.

Sales workflow: contacts, estimates, invoices, and getting paid

Smooth invoicing begins with clean customer records. Enter contact details carefully and avoid duplicates. If you prepare estimates or quotes, decide whether you will create them in the software before converting to an invoice, or continue using your existing documents for now. The simpler your early process, the more likely you are to follow it consistently.

When raising your first invoices, use your agreed numbering sequence and check that the description lines are clear. If you provide ongoing services, consider templates for common invoice lines so you do not retype recurring phrases. When a customer pays, match the bank entry to the correct invoice so the software can mark it as paid. If you need to amend an issued invoice, follow a correction process that maintains a clear audit trail rather than deleting and re‑creating. Your accountant can advise on the best approach for your situation.

Finally, decide how you will nudge late payments: gentle reminders, a follow‑up email, or a phone call. Even if your software offers automated reminders, verify the tone and timing first. The goal is a professional, predictable pattern that gets you paid without surprises for your customers. Keep notes of any agreements or variations so that, if questioned, you can demonstrate what was agreed and when.

• Create customer contacts carefully and avoid duplicates.
• Use clear, consistent invoice descriptions and numbering.
• Match bank receipts to invoices promptly to mark them paid.
• Follow a proper correction process instead of deleting documents.
• Agree a polite, consistent follow‑up routine for overdue invoices.

Expenses and out‑of‑pocket costs: capture, categorise, and reimburse

Expenses become easy to manage when you separate business and personal spending and capture evidence at the time of purchase. If you occasionally pay business costs personally, record them clearly so they appear in the accounts and can be reimbursed or accounted for correctly later. Where the software allows it, attach the receipt image or file directly to the entry.

For suppliers you pay regularly, you may choose to enter bills before payment so you can see what is owed. Alternatively, you can post costs at the point the bank transaction arrives. Either approach can work; discuss with your accountant which suits your scale and reporting needs. The key is to be consistent so your cash, profit and “what you owe” numbers tell the same story.

Refer to GOV.UK’s guidance on business records for self‑employed people for what you must keep and how. While the specifics vary and can change, the principle is stable: maintain accurate, complete records that back up the figures you report. If you travel for business, note down the essential details contemporaneously so you do not have to reconstruct them later.

• Separate business and personal spending wherever possible.
• Attach receipts to expenses at the time of entry or reconciliation.
• Decide whether to enter supplier bills up front or post from bank entries.
• Record out‑of‑pocket costs so they are not forgotten.
• Check GOV.UK guidance for record‑keeping requirements that apply to you.

Reporting, checks, and working with an accountant

Once the basics are flowing, simple checks give you confidence in the numbers. Compare your bank balance in the software to your actual bank balance. Scan for uncategorised or unexplained entries. Review a profit‑and‑loss view to spot outliers: unusual spikes can be genuine, but they can also indicate misposting. Build a short monthly checklist so reviews take minutes, not hours.

If you are self‑employed and thinking ahead to digital submissions, the GOV.UK guidance on choosing software for Making Tax Digital for Income Tax is the authoritative source for checking software options. Before you rely on any tool for filing, check that list for your circumstances and confirm with your accountant what workflow you should adopt. Plans and capabilities can vary, so treat the GOV.UK list as the current reference point.

Finally, collaboration pays for itself. Invite your accountant to view your books so they can answer questions directly in context, and agree how you will work together: who posts what, how queries are flagged, and when reviews happen. Keep a simple log of decisions so you remember why a certain category or process was chosen. This is especially useful if you later bring in a bookkeeper or expand your team.

• Create a short monthly checklist to review balances and categories.
• Use the software’s standard reports to spot anomalies.
• Check the GOV.UK MTD for Income Tax software guidance before relying on any tool.
• Agree roles and review timing with your accountant.
• Keep a brief log of categorisation and process decisions for consistency.

What to do, in order

1. 1

   Decide your accounting start date and gather what you need

   Pick a practical start date and collect statements and records from that point. If you are switching from another system, prepare closing balances as at the day before so the new system begins cleanly.

2. 2

   Add your bank accounts and choose a consistent import method

   Create each business bank or card account in the software and decide how you will bring in transactions (feed or file import). Put a recurring reminder in your calendar to import and reconcile on the same day each week.

3. 3

   Set up customers, invoice templates, and a numbering scheme

   Enter contact details carefully, avoid duplicates, add branding to invoices, and choose a numbering format you can keep long‑term. Raise a small test invoice to check layout and wording.

4. 4

   Create a simple category map and capture receipts

   List your most common income and cost categories and agree with your accountant how to use them. Attach evidence to transactions as you go so nothing is missing at month‑end.

5. 5

   Do the first reconciliation and a mini month‑end review

   Match bank entries, clear unexplained items, and compare the software bank balance to your actual statement. Review a profit‑and‑loss view to spot anything odd before it becomes embedded.

6. 6

   Invite your accountant and confirm any MTD needs on GOV.UK

   Give your accountant access so they can answer questions in context. If you are self‑employed and planning for Making Tax Digital for Income Tax, check the GOV.UK software guidance to confirm suitability before relying on any tool for submissions.