7 Bookkeeping Mistakes To Avoid

7 Bookkeeping Mistakes To Avoid

7 Bookkeeping Mistakes To Avoid

7 Bookkeeping Mistakes To Avoid

These are the 7 most common bookkeeping mistakes self-employed and small businesses should avoid when running their business.

Are you looking for the best bookkeeping services in Birmingham, West Midlands?

It’s important that your financial records are always accurate, but we know doing the numbers are not the most exciting part about working for yourself.

While it’s easier to concentrate on the fun aspects of running your business and doing what you do best, it can be difficult to keep bookkeeping in the forefront of your mind and not let the paperwork pile up. But if you let it slip, it will lead to bigger problems down the road.

For your business to be in its best shape, it is essential that you have accurate records and good bookkeeping. Take a look below at the full list of the main mistakes to avoid and see if you can make improvements.

1. Don't leave the bookkeeping until the last moment

Simply not doing your bookkeeping is one of your biggest and most common mistakes.

There are tasks that we all need to complete but put off until tomorrow. Bookkeeping can be overwhelming and you may not have the energy or time to keep up.

You can easily stay on top of your finances by spending just a few minutes each day dealing with your receipts and looking at your books.

This will help you to gain a better understanding about your daily accounts and allows you to spot potential problems early (such as consistently late payers). This will help you to stay on top of your financial goals.

To make it easier for you and your accountant, have your receipts and records organised each week.

2. Mixing personal and business spending

Although it may seem easier for those just starting out in business to combine personal and business expenses, it can end up costing you time and money.

Having to go through your accounts and find the transactions for your business will make your bookkeeping very difficult and frustrating. This is especially worse if you hire an accountant or bookkeeper to do it for you as it they will charge for the additional time it will take to do through all your records. 

Separating transactions helps reduce errors when it comes to tax returns. You are more likely to pay the correct amount of tax if you have all the income and expenses correctly sorted out in your accounting books or software.

3. Unnecessarily paying for someone's time

Your accountant should be able to quickly access and make sense of your records. Keeping your books in order will allow them to focus on what they do best: reducing your tax bill, putting more money in your pocket and avoiding fines by getting your tax return in on time.

You will also have more time for them to offer advice which can help you run your business efficiently.

Hiring an accountant to do your bookkeeping make seem like an additional cost you can avoid, but experienced  Birmingham accountants like Quest will save you money and help you grow your business, making them an investment rather than expenditure.

An accountant’s expertise in tax and the deductions that can be claimed on expenses will help to reduce your tax liability. They can also help you establish a solid bookkeeping system and provide advice on keeping records that will make your life so much easier allowing you more time to focus on doing the things you do best.

4. Not maintaining good records in your bookkeeping

You won’t be able to keep an eye on your business’ health if you have poor filing habits or don’t keep your receipts. Keep track of very single receipt, even that coffee and cake you purchase for a client in a  quick catch up meeting.

HMRC may request proof of receipts if you are claiming back business expenses in order to reduce your tax liability. Good records can help you keep track of everything and avoid disputes with the tax man.

You should also be numbering and recording your invoices, and making sure that they are in the correct order. To save time and ensure that you pay your bills, consider setting up an automated bill system.

Cloud-based accounting software is increasingly popular for bookkeeping. They can scan receipts and input cash flow information. You can also generate invoices. They can also be used to backup your records. Have a chat with Quest to find out which system would be best for your business.

5. Cash payments

It is a good idea to pay with your card or electronically transfer funds. This will help you keep your bookkeeping records in good order. Your bank will keep track of the date, amount, and recipient’s names.

This saves you a lot of time and effort compared to chasing a cash trail and individually entering the details into a spreadsheet.

6. It's easy to get distracted

Although bookkeeping may seem like an unnecessary distraction from the day to-day work on your business, the simple fact is you need a quiet place and time set aside to focus on the job and do it properly.

It only needs to be 10 minutes a day, but make sure you can focus on the job at hand when you’re doing it.

This is especially true for those who work from home, as family members, flatmates or even the TV can easily distract you from the important task at hand.

You should set aside time each day to work on your books. This will make your life so much easier in the long run helping you finish your work faster and making fewer mistakes (Which will save you money!).

7. Not reconciling your accounts every month

Make sure you check your figures are correct and in agreement every month, confirming they are consistent, accurate, and complete.

This will cause you less bookkeeping headaches down the road if you do it every month. It is crucial to reconcile your accounting system and your financial accounts. This will ensure that your record of income and expenditures matches your financial statements.

It’s difficult to recognise any weaknesses or discrepancies in your business if you don’t do it at least once per month. This will make it easier to assess your business’s performance and allow you to make adjustments if needed.

If you like this blog post: 7 Bookkeeping Mistakes To Avoid, then make sure to check out more like this on our Blog: Best Birmingham Chartered Management AccountantsSole Trader Accountants In BirminghamBest Birmingham Accounting FirmSmall Business Accountants Birmingham

If you want to discover how we can help your business, Quest Birmingham Accountants offers the following services: Tax ServicesSelf-AssessmentVATPayrollNew BusinessR&D Tax Credits, Annual and Management AccountsTax Returns, Self-Employed AccountsBusiness PlanningBusiness TaxAccounts ServicesBookkeepingPensions, and UK Tax Deadlines.

Contact us to book a free tax review of your business or call 0121 2350315 for a chat to find out how we can help you pay less tax, keep more money in your pocket and grow your business.