If you’re doing your bookkeeping yourself there will be room for errors. Especially when you’re so busy trying to run your business and juggle multiple tasks. If your bookkeeping is not accurate you won’t have a true picture of your finances. This can lead to uninformed business decisions which can have an impact on your cash flow and you could end up paying the incorrect amount of tax.

When we take over the bookkeeping from clients who have been doing it themselves we come across some common mistakes. We’re going to talk you through these mistakes that we frequently encounter and advise you what you can do to avoid them.

Inconsistent bookkeeping

Your bookkeeping often gets pushed to one side as there’s always something more important that you need to prioritise. The longer this goes on the more inaccuracies there will be. This means when you do come to tackle your bookkeeping there’s lots of discrepancies to unravel. This makes your bookkeeping more time consuming and just puts you off addressing it even more. 

Set time aside each month to do your bookkeeping and commit to it. When you’re consistent with your bookkeeping it’s easier to keep on top of. It also gives you an accurate picture of your financial position so you can make better business decisions.

Missing paperwork

If you’re currently storing all of your receipts in the glove box in your car or a shoe box in your desk drawer then it’s very likely you’re going to lose vital receipts. Without these receipts you’re not going to be able to claim these expenses back against your tax bill. That means you’ll be paying the tax man more than you need to. 

Use software which will capture your receipts and store them safely. Not only will this keep you more organised and guarantee that you can claim for all your expenses but it’s good for the environment too.

We use Dext which integrates with Xero/QuickBooks for all of our clients. They use a mobile app to take pictures of receipts as and when they spend. Anything which hits their inbox can be forwarded to a dedicated Dext inbox. It’s really simple and easy to use.

Using your personal account for company transactions (and vice versa)

If you’re a limited company, by law you must have a separate business bank account. This doesn’t apply to Sole Traders but we can’t stress the importance of this enough. If you’re using the same account for all transactions your bookkeeping is going to get messy and it will take you much longer to reconcile your accounts. 

Use your business account for business use only and your personal account for personal use. Keeping them separate means that your transactions are easier to trace and your bookkeeping won’t take half as long!

Coding of expenses

Business owners often fail to use coding when it comes to their business expenses, or they use the wrong code. It’s essential to use the correct codes when allocating business expenses for accurate recording keeping. If everything is coded correctly it means your financial statements are precise, giving you a clear picture of your financial spend. 

Failing to save for tax and VAT

This one is a big one and it happens a lot! Failing to put money aside as soon as it hits your bank account means it’s harder to save for your tax bill. We advise our clients to use a bank account which has a separate savings space. When money comes into the account a percentage (roughly a third) should be moved into the savings space. You won’t miss the amount by doing it this way and your tax bill won’t come as a big shock or hit your pocket hard. 

That VAT you receive should be considered as money which doesn’t belong to the business. Every penny of VAT you receive should be added to a savings space or savings account ready to pay your VAT bill. If your VAT bill comes to less than this then that’s an added in bonus for you, but treat it as you would a loan that you have to pay back in full.

If you’re struggling to keep on top of your bookkeeping or not 100% sure that you’re doing everything you should be then the best investment you could make would be hiring a bookkeeper. We will do so much more than just keep accurate records of your accounts. We can help you to budget, plan and grow.

If you’re ready to get back in control of your accounts then reach out today.