There are myriad traps which business owners can fall into when it comes to bookkeeping, all of which can have serious financial and legal consequences. We’ve listed six of the most common ones below – have a check and make sure your business is fully up to speed.
Poor record-keeping
This is a very common problem for busy people who may forget to note down expenses or lose receipts. This wastes time in the long run as you attempt to track down missing documents, but can also cause more serious issues, such as lack of compliance or cashflow irregularities. You need to know how much money is coming in and going out, and the tax you will be liable to pay. Without accurate records, you can’t submit your accounts to HMRC and may incur a penalty.
Combining business and personal expenses
It’s important, even if you are only just starting up a business, that you open a separate business bank account. It may be easier to use your personal account or credit card to handle income and expenditure, but you’ll need to separate them later. Unless you have faultless personal accounts, this will be a time-consuming exercise. In addition, you may forget essential business expenses and miss out on offsetting tax.
Not backing up data
You’d think this would be obvious, but it’s something many business owners put off or forget altogether. If anything should happen to your records, such as a malware incident or even human error, it could take weeks to recover, not to mention the expense of possible specialist help. Data should be backed up daily, both on your computer and to an external hard drive; online accounting software such as Sage or Xero will automatically back up your data every 24 hours. You also need to ensure your cybersecurity is sufficient and regularly updated.
Poor petty cash management
Petty cash is a small amount of money – literally coins and banknotes – which a company keeps for paying minor expenses. It may not sound important, but sloppy petty cash management costs UK businesses millions of pounds a year. The most common reasons are lost receipts and too many people dipping in for some loose change with no accountability. Meticulous accumulation of receipts and ensuring all employees adhere to a limit on using petty cash is necessary to keep it under control.
Failing to allow for VAT payments
If your business is registered for VAT, either because its taxable turnover is over £85,000 or because it has been voluntarily registered, then you will need to submit your VAT returns either monthly, quarterly or annually to HMRC. If you have chosen to pay annually, you could find that an issue such as an unexpected drop in sales means you don’t have the available funds for the larger amount, resulting in a default on the payment. To reduce the likelihood of this occurring, it may be more practical to change to either monthly or quarterly advance payments towards your annual VAT bill, but it still needs to be done accurately and on time or penalties will be incurred.
Wasting valuable time with DIY bookkeeping
There’s a bewildering number of financial concerns to keep up to date with when running even a small business. Payroll, credit control, cashflow, management accounts, auto-enrolment pensions -they are all obligatory and complex. You can’t be out marketing your business or working on research and development if you’re tearing your hair out over your bookkeeping. A professional bookkeeping service will free you up to take care of what really matters – growing your business.
If you would like help with any aspect of your bookkeeping, the friendly and experienced team at AMR Bookkeeping Solutions can provide all the support you need. Call 01892 559480 or contact us through our website.
