Bookkeeping is often perceived as a tedious and mundane task by many business owners, leading to common mistakes that can have significant implications for their financial health. Surprisingly, more than half of small business owners fail to keep their finances up to date on a monthly basis. To help you avoid these pitfalls and ensure accurate bookkeeping, we have identified seven common mistakes and provided valuable tips on how to avoid them. By implementing these strategies, you can maintain financial clarity, make informed decisions, and focus on growing your business with confidence
Neglecting Proper Record-Keeping:
Every expense, no matter how small, should be meticulously recorded. Failing to do so can create chaos in your bookkeeping process. Consistently maintaining accurate records provides valuable financial statements that offer insights into your company’s performance. If interpreting these statements is challenging, seek assistance from an accountant to ensure clarity and informed decision-making.
Failure to Back Up Data:
Whether you use manual spreadsheets or online accounting software, backing up your data regularly is crucial. Create a habit of backing up your records daily, both on your computer and on external storage devices or servers. Confirm that your chosen accounting software automatically backs up data at least once a day to multiple secure locations.
Overlooking Reimbursable Expenses:
Expenses paid from personal funds often go unnoticed and unrecorded. To prevent loss of money and missed tax deductions, establish a company policy for tracking reimbursable expenses. Organizational discipline is key to effective bookkeeping.
Discarding Receipts:
Disposing of receipts can hinder your ability to claim tax reductions. Many business owners neglect to keep their receipts in a suitable place or maintain a record of them. Consider digitizing receipts and storing them securely on your computer for easy retrieval. Retain receipts for at least six years to meet tax compliance requirements.
Excessive Time Spent on Bookkeeping:
Small business owners risk dedicating excessive time to bookkeeping, which could be better utilized for other productive activities such as business growth strategies. If you find yourself overwhelmed by bookkeeping tasks, it may be wise to enlist the services of an accountant who can handle the process on your behalf.
Failure to Set Aside VAT Funds:
For VAT registered companies, it is crucial to allocate the VAT portion of invoices for payment to HMRC. Failure to do so can result in penalties up to 15% of the unpaid VAT. Establish a system to set aside VAT funds separately and ensure timely submission of VAT returns.
Neglecting to Obtain VAT Receipts:
In addition to paying VAT on sales, it is essential to retain invoices and receipts for purchases where VAT has been charged. These documents are necessary for reclaiming VAT. Always request a valid VAT receipt or invoice and familiarize yourself with the rules and regulations governing VAT reclaims. Consult with an expert accountant to ensure compliance and optimize your VAT returns.
How 360 Accounting Can Assist You:
If your business struggles with time-consuming bookkeeping tasks and encounters these common mistakes, our expert accountants are here to help. Our comprehensive bookkeeping services will alleviate your burdens, allowing you to focus on maintaining and expanding your business. Contact us today to learn more about how we can support you. You can reach us at +44 (0) 203 885 2832 or email in**@36*******************.net .
