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Providing Independent Financial Advice In Lancashire
Common Bookkeeping Mistakes
Especially as a small business owner, the world of bookkeeping can feel like a tightrope. It’s not just errors that can creep in because you were tired when you did them, or because your records storage is having problems, or anything else. It can also be issues you didn’t know were mistakes in the first place – especially if you’re not up to date on all relevant legislations and guidelines.
With that in mind we wanted to put together a list of the most common errors we’ve found (and fixed!) when new clients sit down with us and their books. We hope it’s going to help you to find some good fixes for you, too.
Providing Independent Financial Advice In Lancashire
Keep Personal and Business Separate
The moment you have a business account as well as a personal account, it’s time to start keeping the two separate. This sounds obvious, but it’s easy to slip. Perhaps you’re waiting for a client to make a big payment, but you still need stock from your supplier.
It’s tempting to pay on your personal card (assuming you have the money there, of course!) and sometimes it might be the only or best solution from a financial standpoint. And if it’s essential, you should certainly do it! But make sure you document it clearly at the time so you can handle it correctly once you update your books.
That’s the easy version of the challenge, too – if you’re entertaining a client and realise you don’t have the company card with you, you might not be in the right headspace to track it immediately. But if you don’t, you’re going to have real difficulty assigning that receipt into your expenses.
Speaking of which…
Providing Independent Financial Advice In Lancashire
Keep the Receipts Too
Your receipts are a key part of your paper trail as well as being a key part of balancing your books. A receipt that’s lost becomes a big problem, but many of us have got into the habit in our private lives of not really caring about receipts. You need to unlearn that now.
Many modern accountancy software packages allow you to scan your receipts as part of digitising your records, and that can be a lifesaver – but you still need to get them into the system.
Sometimes it’s not just about not losing your receipt – we’ve all dealt with receipts printed with cheap ink on shoddy paper, where they’ll wear clean over time. The quicker you get these scanned, the better. Get into the habit of putting all receipts in a safe space until you process them, then scanning them immediately.
If you’re working in an industry where receipts are often handwritten – they still exist; ask anyone who buys produce from a nearby farm – make sure you can read what’s written there. Coming back to update a purchase you made before day’s work when you sit down in the evening, you’ll be amazed how easy it is to forget the fine detail.
Providing Independent Financial Advice In Lancashire
If You’re Not Sure, Check
Do you know how to calculate depreciation? Are you sure what the maximum cost of a trivial benefit is? (It’s £50, by the way, but check that it qualifies in all other ways.) If you’re not sure, it’s absolutely best to check.
There are many different types of expense and benefit (gov.uk has this handy list) and it’s important to keep track of the tax and National Insurance implications of each one relevant to you.
If you don’t realise how many categories there are – did you know the rules for Christmas bonuses to employees differ from the rules for other bonuses to employees? How about fuel for company cars versus company vans? – there are several situations where you’d end up reporting incorrectly or paying taxes incorrectly. Neither is good.
As you go through your books, we recommend you get into the habit of asking yourself “Am I sure about this?” More and more, you will be, especially when it’s something you do all the time. But staying in that habit will help you when you would otherwise make a mistake.
Providing Independent Financial Advice In Lancashire
Don’t Miss Out on Tax Deductions
It’s easy to spend most of your bookkeeping time looking out for tax obligations you might miss. We all know how badly getting that wrong can go. But we’ve seen more than a few sets of books belonging to start-ups and newly formed companies where they missed out on significant tax deductions they were eligible for. That kind of mistake can radically slow down the growth of your business.
Keep On Top of Your Books
This one isn’t just about making it easier to get everything filed accurately and compliantly as you approach a deadline. It’s not even just about reducing the stress of a marathon accounts update with a deadline just ahead.
Yes, submission deadlines create a time when you absolutely must have everything in order. But your business accounts are a key tool to help you build a strategy, for the rest of the year or longer – and if they’re not up to date enough to give you a clear picture of your financials, that tool will only hurt your business, not help it, because you’ll be making decisions based on an inaccurate understanding of your financial state.
Getting It Right
Making sure your bookkeeping is accurate is a time-consuming process at the best of times. It requires attention to detail, alertness, and a wide knowledge of financial legislation. But it’s essential for your business to grow. Certainly, once your business has more than a handful of staff it’ll be impossible to hold the financials in your mind without written reference.
However, in our experience, the point where a business owner’s unaided mental picture of their financial situation stops being accurate is much earlier than that – and much earlier than several realise it. If you want to make sure your business has the understanding it needs, why not get in touch with the professionals?
Professional Accounting And Financial Advice
Contact TRW Accountants
Address:
TRW Accountants
95 King Street
Lancaster, LA1 1RH
Contact Details:
Tel: 01524 64187
Fax: 01524 60029
Email: office@tr-w.co.uk
Registered in England and Wales. Registered office – as above. Company registration 03851905
