Common Accounting Mistakes Small Businesses Make & How to Avoid Them
Managing your accounts is the most critical part of running a small business. Poor accounting can lead to cash flow problems, tax penalties and missed opportunities.
At SCS Financial Management, this month’s blog looks at common accounting mistakes small businesses make. For more information, call us in Reigate on 01737 373707.
Call our team on 01737 373707
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Mixing Business & Personal Finances
It may be tempting to use personal bank accounts for business purchases, or to pay for personal items with your business debit card. However, this blurs the lines between personal and business spending, creating a bookkeeping nightmare.
In doing so, it makes it harder to track true business costs and profits. It also increases the risk of errors in your accounts and can complicate things if HMRC requires evidence. By opening a separate business bank account and keeping all receipts for business expenses, you can stay on track and ensure compliance.
Not Keeping Receipts & Proper Records
Throwing away receipts or failing to log transaction can cause issues, such as being able to claim legitimate expenses and protecting yourself in tax inspections.
Without proper records, you may miss out on allowable tax deductions and end up with poor business records. We recommend storing your records securely for at least 6 years and keeping digital records in line with Making Tax Digital (MTD).
Your Finances are Becoming too Complex
When your income starts growing, you’re taking on staff, or you’re dealing with multiple revenue streams and expenses. Therefore, spreadsheets might no longer cut it.
An accountant can help you streamline everything. This includes tracking cash flow, managing payroll, and ensuring you’re making the most of allowable expenses without falling foul of tax rules.
Missing Tax Deadlines
It can be easy to lose track of deadlines. However, if you do, you will accrue automatic penalties and interest charges. To add to this, it can damage our credibility with HMRC and suppliers.
One way to avoid this is by hiring a professional accountant. They can manage the deadlines for you and ensure your taxes are submitted on time.
Misunderstanding VAT Rules
VAT is one of the most misunderstood areas of small business accounting. Many businesses don’t realise they are required to register, or that they incorrectly reclaim VAT on ineligible purchases.
Failure to register on time can result in backdated VAT and penalties. It is important you understand the current VAT registration threshold and use compliant Making Tax Digital compliant software for VAT submissions.
Contact SCS Financial Management
For more information about our accounting services, contact SCS Financial Management. Call us in Reigate on 01737 373707. Alternatively, you can make an enquiry via our contact form.
