Common bookkeeping mistakes

Amongst all those things is bookkeeping, a small but very important part of your business! Did you know that the most common reason for business failure is poor financial management. Many businesses fail not because they weren’t busy, not because they couldn’t sell their product, not even because they weren’t growing but because they ran out of money and in many cases, it happened without them knowing it was about to happen! If they had known they could have been able to take steps to save the business.

Good bookkeeping will help to keep the business on track and growing, it will help you to know when cash may be tight and a short-term loan or overdraft may be required to keep things afloat. If the bookkeeping is poor, unfortunately, you may not see the wall until you’ve hit it!

However long your business has been running and whatever level of turnover and profit you have, it’s never too late to take a breath and see if there’s anything we’re doing that could be better. The same is true of your bookkeeping, there are mistakes that business owners commonly make and it’s worth checking from time to time that you’re not falling into that trap.

In this blog we’ll discuss the bookkeeping issues that we most commonly see. If you think you need help to get on top of your bookkeeping or just need a steer in the right direction, contact us we’d love to help.

Keep all your receipts

You’d be amazed at how many businesses don’t keep all their receipts. There are some instances, for smaller amounts, where a receipt is not required but it’s so much easier to track spending when the full records are available. It will also help when it comes to your tax return to ensure that you don’t miss a valid business expense that you should be claiming for.

Business or personal?

Wherever possible try to keep your business and personal finances separate and use different bank accounts for each. We’ve all accidentally used the business card to pay for a personal purchase but if you do it regularly, you end up with a cluster of receipts and you can’t remember which were business expenses and which weren’t. Best practice is to decide on an amount to pay yourself each month that your business can afford and transfer it just as if you were being paid by an employer.

Regularly reconcile

Anyone can make mistakes, but we can help you get your books back on track!!

You should regularly check your bookkeeping records and receipts against your bank statements to check that everything matches up. This will help you to pick up any mistakes that you may have made but it also helps you to spot any mistakes that the bank or your credit card provider may have made. I’ve seen one instance where a credit card payment for over £800 was withheld by the card issuer and it wasn’t uncovered until the reconciliation was carried out. Not doing it could be costing you money.

Finally…..

Will bookkeeping software help?

So it’s definitely worth a chat to see if you can free up your time, make sure everything is done properly and with packages starting from £30 per month it’s not as expensive as you might think.

If your business is very small or maybe just starting out, you may feel that accounting software is unnecessary and costly. However, your time is precious and so much of your bookkeeping can be automated using bookkeeping software that you will be able to concentrate on other parts of your business. It will also help you to categorise your spending so that you can see where the costs are and quickly spot opportunities to cut unnecessary costs.

Your accounts, like HR, is an area where you have to comply with so many regulations, get so many things right and there are often financial consequences if you get it wrong.

The most common options are Xero, QuickBooks, Sage and FreeAgent and all will help speed up your bookkeeping and help to keep it more organised.

Sometimes the decision to outsource tasks to professionals can lead to lower costs and less chance of mistakes. It also frees up your time to focus on that next big product that will lead to the next phase of growth in the business.

We are a Xero partner and can advise on the best version of the software to suit your business with some versions starting from less than £10 per month. We can also provide training to ensure that you get the best out of your software. If you want to know more about accounting software just get in touch.

One of the biggest mistakes that business owners make is that they think their time is has no value. They often they think to themselves “why would I pay someone to do that, when I can easily do it myself for free?” The reality is that your time is not free, in fact, it’s the most valuable commodity you have.

Keep it short and sweet!

Trying to do everything yourself

People say that you should do your books regularly! What does that mean for me? The answer to that is that it depends on the business size and the volume of transactions. Once per week should probably be the minimum for every business but for larger businesses with many employees and many expenses it may need to be done twice a week or even every day.

The more often you do it the shorter the task will be, the easier it will be to remember the nature of the transactions and the more accurate your books will become. This will help to make it a short and sweet task that doesn’t feel too onerous.