How We Manage Invoicing and Expenses for Our Small Business Without Paying for Software

When we started the business, we did what most people do.

We made an invoice in Word. We saved it in a folder called "Invoices 2023" that quickly became impossible to navigate. We tracked expenses in a spreadsheet that worked fine for about three months and then became a source of quiet dread every time we opened it.

We looked at the big accounting software options, Xero, QuickBooks, FreshBooks, and baulked at the monthly fees. Not because we couldn't afford them, but because they felt disproportionate for where we were at. We weren't turning over hundreds of thousands a year. We were a small business trying to stay organised without haemorrhaging money on tools before we'd proved the model worked.

So we figured it out without paying for software. And after going through several iterations of what works and what doesn't, here's an honest account of how we actually do it.

The invoicing problem we kept running into

The Word invoice system had one fundamental flaw: we had no way to know, at a glance, which invoices had been paid.

We'd open the folder, see thirty files named things like "Invoice_JonesPlumbing_March.docx", and have no idea which ones had money sitting behind them and which ones were still outstanding. Chasing payments meant cross-referencing bank statements, so the invoices that didn't get chased were the ones that took the longest to get paid.

We also had no automatic reminders. If a payment was overdue, we had to notice it ourselves and send a manual email. We're busy running a business, which is not always at the forefront of our minds.

The first thing that genuinely improved our invoicing was switching to a platform that tracked status automatically. Sent, viewed, overdue, paid, at a glance. We stopped chasing invoices late because we could see immediately which ones needed attention.

What we actually use for invoicing now

We use a free platform rather than paying for software. The one we landed on is Built For Small Business, a UK-focused platform that covers invoicing, expenses, payroll and clients in one place, without a monthly fee.

The reason it works for us isn't the feature list. It's the fact that we actually use it consistently, because the friction is low. Sending an invoice takes about two minutes. Payment reminders go out automatically. When a client pays, it updates immediately.

We also tested Wave, which is well regarded and genuinely free. For invoicing alone, it's very capable. We moved away from it because we wanted payroll and expense tracking in the same place, and Wave's payroll for UK businesses is limited.

How we handle expenses

This took us longer to get right than invoicing.

The shoebox era lasted longer than we'd like to admit. Receipts in pockets, in the car, in a drawer next to the kettle. The end-of-year expense reconciliation was a multi-hour exercise in archaeology.

The change that made the biggest difference wasn't software. It was a habit: photograph every receipt immediately. Before it leaves your hand, before it goes in a pocket, before you forget what it was for, open the phone, take a photo, attach it to the expense record.

Combined with a weekly 20-minute log (Sunday evenings work for us), we went from dreading the year-end reconciliation to it being a relatively minor exercise. All the receipts are there. All the categories are right. The figures are accurate.

The categories we use for expenses

Keeping expense categories consistent matters because it makes the year-end figures meaningful. Our categories:

Materials and supplies — anything bought specifically for client work

Vehicle and travel — fuel, parking, mileage, any work-related travel costs

Equipment and tools — purchases that will last more than a year go here; consumable tools go under materials

Insurance — business insurance, professional indemnity, public liability

Software and subscriptions — anything digital, including this invoicing platform

Phone and broadband — the business proportion (we use 60% for these, which our accountant agreed was reasonable)

Marketing and advertising — website costs, ad spend, printed materials

Professional services — accountant fees, any legal costs

Office and admin — postage, stationery, anything that doesn't fit elsewhere

The categories aren't the important part; what matters is picking a set and sticking to it consistently, so year-on-year comparisons are meaningful, and your accountant isn't having to interpret what "misc." means.

What do we do about bank reconciliation?

Once a month, usually the first Sunday of the month, we run a quick reconciliation. Every transaction in the business bank account gets matched to either an invoice payment received or an expense recorded.

If something doesn't match, it gets investigated. Usually, it's something simple, a subscription we forgot to log, a bank fee, an invoice payment that came in under a slightly different name. Occasionally, it surfaces something more significant.

Monthly reconciliation means we catch discrepancies while they're recent and easy to resolve. Leaving it to year-end means trying to remember what a payment from eight months ago was for.

The payroll question

For the first couple of years, we paid ourselves in dividends rather than salary, which simplified things considerably. When we started employing someone part-time, we had to get proper payroll.

We use the same platform for payroll as invoicing and expenses; it keeps everything in one place, and the payslips are generated automatically once the figures are in. HMRC requires RTI (Real Time Information) submissions every time payroll is run, which the platform handles.

If payroll is new to you, the most important thing to understand is that it's not optional and HMRC monitors it in real time. Mistakes get caught quickly. Getting set up correctly from the start, even if it means an hour with an accountant, is worth the investment.

What we still use an accountant for

We're not suggesting you avoid accountants. We use one, and she earns her fee.

What we don't do is rely on her to reconstruct our records at year's end. We hand over organised books, all income recorded, all expenses categorised, bank reconciliation done, and payroll figures accurate. Her job is to review, advise, and file. Not to untangle twelve months of chaos.

The result is that our accountant's bills are lower than they would be if we handed over a shoebox, and the relationship is more productive; she spends the time we pay for giving advice rather than doing data entry.

The things we wish we'd known earlier

Invoice the same day. We know this sounds obvious. We still occasionally leave it a day or two and regret it. Same-day invoicing gets paid faster, full stop.

Separate business and personal from day one. A dedicated business bank account costs nothing with most modern banks. Not having one means your personal and business finances are tangled in a way that creates hours of extra work at year's end.

Record expenses even when you're not sure. When in doubt, log it and mark it as uncertain. Your accountant can advise on whether it's allowable. An expense you don't record is gone; you can't claim it retrospectively if you've lost the receipt and forgotten it happened.

The software doesn't have to cost money. The gap between free and paid invoicing/expense software has narrowed significantly in the last few years. The monthly fee that felt unjustifiable when we started still feels unjustifiable, because we've found free tools that do everything we need.

Is it perfect?

No. There are months when the Sunday admin routine slips, and we catch up in a rush. There are expenses we can't find receipts for. There was one year when a batch of invoices wasn't followed up properly, and cash flow got uncomfortable.

But the system is good enough. It keeps us organised, keeps our accountant happy, and means January is a minor inconvenience rather than a crisis. For a small business watching every pound, that's worth more than any premium software subscription.