With business success comes serious financial responsibility. You may have an amazing product or service to offer, but without an efficient system in place to manage your company’s finances, your venture is unlikely to succeed.
Over half of all business start-ups fail within their first five years, and while there are many reasons for this, poor financial management is often a key factor.
Here at AMR, we work with companies large and small to keep their bookkeeping and payroll tasks on track. With hundreds of clients across the South East and London, it’s fair to say we’ve come to the rescue of many a business, helping to turn chaotic administration into a streamlined system that maximises profit.
Over the years we’ve noticed a pattern of common errors which we’ve listed in the six points below. Avoid them at all cost!
- Failing to put money aside for VAT. If you are VAT registered, your invoices will be paid with 20% VAT included. This money belongs to HMRC, and should on no account be ploughed back into your business. VAT should always be set aside and paid to HMRC via your quarterly VAT returns. Failure to do so will result in escalating surcharges of between 2% and 15% of the unpaid VAT.
- Leaving admin until the last minute. When you delay essential tasks such as filling out VAT returns, paying suppliers or issuing end-of-year P60s, you run the risk of rushing the job and making errors which take time to rectify. Ensure you forward-plan, listing key dates in your business diary and hitting deadlines in good time.
- Forgetting to ask for a VAT receipt. VAT works both ways – you will receive VAT on sales invoices which you must put aside, but you also need to keep receipts and invoices from your company purchases so that you can re-claim the VAT element. But to do this, you must have a valid VAT receipt or invoice. You won’t necessarily get this automatically, and might have to make a point of asking.
- Losing receipts! Even if you’ve been careful to ask for VAT receipts, you then need to store them in a safe place, ideally recording each one using bookkeeping software. Programs such as Xero allow you to upload electronic copies, keeping them all in one place and accessible 24/7 on the cloud. Set aside time each week to upload receipts in batches. Don’t make this a monthly task – the more time elapses, the more of a struggle it will be to locate those receipts.
- Mixing up business and personal spending. If you’re out for a meal with friends and find you don’t have any money in your personal bank account, it might be tempting to pay with a company credit card. Similarly, you might put a business expense on your personal card. Muddling up your spending in this way not only creates extra work when it comes to identifying payments, you could also miss out on expenses that can be offset.
- Ignoring rules on workplace pensions. Auto enrolment in workplace pensions has now been rolled out to all companies, whatever their size. Under the rules, if you employ at least one person you must enrol them into a pension, although they do have the right to opt out. The Pensions Regulator fines non-compliant companies and publishes their names on its website. Don’t be named and shamed!
Even the smartest business people can fall into these traps, which is why it’s so important to be vigilant and put sound financial management practices into place. Your time is money, and you may find it’s more cost efficient to contract out bookkeeping and payroll tasks to a team of experts. If this is something you’d like to discuss with AMR, please don’t hesitate to get in touch. Our fully qualified bookkeeping professionals will be happy to discuss your requirements, and tailor a service that perfectly meets your needs.
