When your bookkeeping is done accurately, with precision and attention to detail you will have clarity of your finances. When mistakes occur it can have a detrimental impact on your business. Errors in your accounts may mean you’re paying the wrong amount of tax, this could be too much or too little. If it’s the latter you could be hit with fines and penalties further down the line. If you’re paying too much it could impact your cash flow. Without a clear understanding of what your numbers mean, you will make uninformed decisions for your business which can lead your business in the wrong direction.
We’re going to highlight common mistakes that you can avoid in your bookkeeping to ensure your accounts are accurate.
1. Neglecting your bookkeeping
Many business owners find it difficult to keep on top of their bookkeeping. Tasks which bring in the revenue will always be prioritised which means you struggle to find the time for your business admin. The problem with this is that by neglecting your bookkeeping you will never have an accurate picture of your financial situation.
2. Missing paperwork
Lost paperwork can mean you end up paying more to the taxman than you need. No one wants to pay more than they need to! The best way to avoid losing your invoices and receipts is to use cloud software. At Long White Cloud Accounting we use Dext so that our clients can use the app to upload their receipts as they spend. Taking a quick picture of the receipt which takes seconds, means all of your receipts are safely stored.
3. Using your personal account for business use and vice versa
When you’re making purchases for your business, always use your business card. If you choose to use your personal account this can make your bookkeeping messy. It’s harder to keep track of what’s a personal expense and what’s a business expense. Keep them separate!
4. Coding expenses incorrectly
If you’re using accounting software for your bookkeeping, which we hope you are! Ensure that the codes you are using for each expense are correct. Choosing the wrong code means that your record keeping is inaccurate and your financial statements and reports will not give you a true picture of your financial spend.
5. Forgetting to put money away
If you’re VAT registered it’s vital that you put the VAT you receive to one side. Open a separate savings space with your business account if possible, or set up a separate savings account. When you come to pay your VAT bill the money will be there waiting. There will be no pressure to get that money together.
The same goes for your Corporation Tax and Income Tax. By saving the money each month you won’t have the worry of that nasty bill.
6. Failing to keep track of stock levels
If your business carries inventory, it’s important to keep a record of this and check it regularly with actual physical counts. This helps prevent inventory shrinkage and financial discrepancies.
7. Forgetting about depreciation
Some assets, like equipment or vehicles, depreciate over time. Failing to account for depreciation can overstate your assets' value on your balance sheet.
8. Relying on software
Software is only as good as the data you enter. The reports are only as accurate as the information you input. You need to have an understanding of how the reports work and what they mean. Invest some time into the integrations and automations to make sure you’re getting the most from your software. Remember that software also requires human intervention, don’t solely rely on it.
9. Missing deadlines
By missing deadlines such as your VAT returns and Tax returns it will result in paying out more. It will also lead to stress and overwhelm for you. By ensuring you’re ready for your deadlines in good time, you only need to pay the amount owed and you can relax knowing it’s all taken care of in good time.
10. Failing to invest in professional help
Many business owners assume they can do the bookkeeping themselves. The problem with this is that you don’t have the time to keep on top of your bookkeeping on a regular basis, so your records are not accurate. You don’t necessarily understand what your numbers mean or have an insight into the future of your finances. You have the worry that you’re not compliant with all the rules and regulations from HMRC. You overlook vital information such as your assets and don’t claim all the expenses you're entitled to.
There’s so many ways a bookkeeper can support your business in its growth and success. A bookkeeper is an investment and also an allowable expense! Invest in your business today and book a call.
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