5 common bookkeeping mistakes to avoid as a small business owner
PUBLISHED: 15:53 17 November 2014 | UPDATED: 16:08 17 November 2014
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Whether your business is a start-up or has been going for years, keeping on top of your accounts is an important aspect of owning a business. Heather Dore, Regional Manager at Easy Accountancy highlights some of the most common mistakes that self-employed individuals and small business owners make when taking care of their company finances.
1. Leaving it till the eleventh hour
In February 2014 HM Revenue and Customs reported that 21,027 self-employed individuals submitted their tax returns between 11pm and midnight on deadline day... literately leaving it until the eleventh hour.
As well as giving you a whole lot of headaches, not keeping on top of your bookkeeping could leave you vulnerable to penalties for filling incorrect accounts. Your income will keep coming in and expenses will continue to go out regardless of if you have recorded the figures or not. If you leave your accounts piling up you may find you are never be able to catch up, and so doing a little bit of your bookkeeping every day or every week will ensure that you are in control of your finances.
2. Not keeping business and personal finances separate
Organising company accounts can be time consuming and stressful. Keeping your business and personal accounts separate is an easy way to make the whole process much simpler. Place all of your income and profits into a dedicated bank account and don’t use your personal money to pay for company expenses.
3. Loosing track of receipts
As a self-employed individual or small business owner costs that are incurred solely for the use of your business could be claimed as business expenses. If you are claiming business expenses then you must keep a record that the expense was incurred (i.e. a sales receipt) in case HMRC ask to see proof of purchase. If you do not keep track of your expense receipts you will be unable to offset the cost through your business and you may end up paying more tax than you need to.
4. Not recording modest expenses
From parking tickets to printer ink self-employed individuals and small business owners will incur business expenses on a regular basis. It is easy to think that small amounts don’t matter and therefore do not need to be recorded, but all of these small amounts can add up to a tidy sum over a year and so need to be noted as an expense.
5. Failing to appoint an accountant
Small business owners and self-employed individuals may think that in doing their accounts themselves they are saving money. This may be the case if you have experience with bookkeeping, but if you are struggling with your accounts and don’t seek the help of a professional the potential penalties for late or incorrect submission could be far more costly.