Accounting Mistakes and How to Avoid them
Posted on 3rd October 2023 at 10:12
Discover the common accounting mistakes many business owners make and learn how to avoid them
Steering a small business towards success is not always easy. One of the key areas that can make or break your business is accounting. Proper financial management and bookkeeping not only ensure your business remains compliant with HMRC but it also sets the stage for sustained growth. Yet, many small business owners unknowingly fall into accounting pitfalls. This article explains the most common accounting mistakes small business owners make and how you can avoid them.
Mixing Personal and Business Finances Mistake: Using a single account for both personal and business expenses.
Solution: Open a dedicated business bank account. This will streamline bookkeeping, make it easier to track expenses and simplify your tax return processes.
Neglecting to Record Small Transactions Mistake: Overlooking minor expenses, thinking they’re inconsequential.
Solution: Record every transaction, no matter how small. These can add up and significantly impact your financial statements.
Not Regularly Reconciling Accounts Mistake: Only checking bank statements against your books sporadically.
Solution: Schedule regular reconciliations, ideally weekly. This helps catch discrepancies early and can save you from larger financial headaches and bills further down the line.
Failing to Understand VAT Rules Mistake: Incorrectly charging or reclaiming VAT.
Solution: Familiarise yourself with the VAT regulations, especially if you’re required to be VAT registered. When in doubt, consult experts like us!
Not getting Professional Help Mistake: Assuming DIY accounting can suffice or relying solely on software.
Solution: While software is invaluable, consider hiring a part-time accountant or bookkeeper, especially during growth phases or tax seasons. Our team are ready to help you.
Incorrectly Categorising Expenses Mistake: Allocating expenses to the wrong categories, leading to skewed financial insights.
Solution: Understand expense categories and regularly review them. Training and periodic checks can help, HMRC have a variety of videos and webinars to help you.
Not Preparing for Taxes Mistake: Leaving tax preparations until the last minute.
Solution: Stay tax-ready all year round. Regularly set aside a percentage of your income for tax purposes and be aware of all the submission deadlines.
Overlooking Receivables Mistake: Not actively pursuing unpaid invoices.
Solution: Implement a robust invoicing and follow-up system. Regularly review outstanding invoices and remain proactive in collections. Chasing debts is not comfortable but not getting paid is even more so!
As you can see, accounting mishaps and errors, if left unchecked, can escalate into costly complications. By being aware of these common pitfalls and implementing the solutions outlined above, you’ll be better positioned to guide your business towards financial stability and success. Remember, when in doubt, don't hesitate to get in touch with us, we could save you a lot of money.
Contact us if you need help or advice preparting your accounts.
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