Here are our Top 10 Bookkeeping mistakes and how to avoid them
Letting it all build up
This seems obvious, but some people still leave everything to the last minute. We know you didn’t go into business to do the books – that’s why we exist – and that it’s your least favourite part of it all, but IT HAS TO BE DONE. Little and often, at set times in your diary, will help you stay on top of it all. No one wants to get to deadline day before making a start.
Not having a backup
Hard to believe, but some people still use pen and paper to maintain their records or maybe spreadsheets. What back-ups do you have if you lose the books or they were damaged? Do you take back ups of your records and keep them offsite if you are using a spreadsheet? If disaster strikes and you lose everything, Companies House and HMRC will not be sympathetic when you can’t provide them with the information they require.
Not being online
Moving your bookkeeping online is the way forward. It is so much simpler, safer and easier to access when you have all your records in a system like Xero as this will assist with a lot of the work and make the process more streamlined. Read why we love Xero here.
Doing it yourself
So many business owners – who have no training or experience in bookkeeping – think that they can save money by ‘having a go themselves’. Firstly, the time and cost of fixing it is always more than getting it right in the first place. Secondly, it is rarely cost effective for you to do it yourself. If you are a consultant charging £100 per hour, why would you spend 10 hours a month struggling with your own bookkeeping when you could have an expert do it in half the time for £30 an hour and spend your time consulting? You are £850 worse off a month by doing that! Find someone who knows what they are doing to make it easier for you.
Not keeping receipts
You need to keep your receipts to back up any expenses in your accounts, particularly if you are VAT registered or paying Corporation Tax. HMRC can insist on seeing these at any time for any period, so not having them ordered in a safe place may come back to haunt you. Using Receipt Bank in conjunction with Xero can help speed up the bookkeeping and will serve as a virtual filing cabinet.
Using a private bank account
Mixing your own personal expenses with business expenses makes it harder to unravel what relates to what, even more so when there is not a separate bank account for the business. Get one set up as soon as possible
Not categorising properly
Taking time during the year to categorise all your expenses correctly will make your numbers more useful and save time at the year end. If you have put everything to ‘General expenses’ you are going to have no idea what you have been spending your money on until your accountant unravels all at the year-end – charging you for the privilege.
Getting the VAT wrong
As bookkeeping feeds directly into the VAT returns and payments it is vital to account for it correctly. Not having receipts to show what VAT amount was paid or what rate was applied may lead to errors and underpayments on the returns – HMRC will not be happy about that particularly if they believe you have not shown due care.
Failing to record reimbursable expenses
From time to time you are likely to pay for things privately on behalf of the business, and maybe even incur expenses in behalf of your clients that you need to recharge. If you are not recording this properly then both you and your business could be out of pocket.
Not reconciling to the bank
Cash is king! By not reconciling everything back to the bank balance you have no way of knowing if your accounts are right. You can’t be sure what has and hasn’t been paid, or of what your actual profit is. Xero has the bank reconciliation as its back bone and for good reason.
To talk to us about your bookkeeping needs – or anything else – please contact us on the details above.