Five Common Bookkeeping Mistakes New Businesses Make
Bookkeeping is one of the most difficult things to get to grips with when you start a new business. You need to know how to accurately keep records, learn new terminology, be aware of when to file tax returns, learn how to file tax returns, and make sure you pay tax on time. It’s understandable then that mistakes are easily made.
Today I’m going to cover the most common bookkeeping mistakes new businesses make and explain how you can avoid them.
1) Putting off doing any
Bookkeeping is one of those admin jobs that most business owners put off until a deadline is looming. This is a recipe for disaster. Trying to do a year’s worth of bookkeeping in a few days (or hours) is extremely stressful and likely to result in errors, late filing and penalty fees.
Instead, set aside a few hours each week to keep your books in order. Use software like QuickBooks if you can, as this will save you time and provide useful data about your finances.
2) Not knowing key dates and deadlines
It’s important that you know the tax deadlines that apply to your business because if you file or make payments late, you will be charged a penalty fee.
There are a number of key dates throughout the year and it can all get a little complicated; especially if you have employees and pay VAT. This article contains a really useful calendar of the average tax year. But do bear in mind that your circumstances are unique and there may be deadlines relevant to your business not included in that article.
3) Not keeping personal and business finances separate
If you’re a sole trader, you are not legally obligated to open a business bank account or even keep business and personal finances separate. However, it does make bookkeeping a lot easier if you do keep them apart.
If your personal and business transactions are all mixed together, it becomes difficult to know what’s what. This in turn may affect how accurately you are able to calculate taxable profits and allowable expenses.
4) Losing expense receipts
Too many business owners throw away receipts, forgetting that without it they can’t claim the expense. So if you buy anything for your business, make sure you keep the receipt. Even better; document the purchase, take a photograph of the receipt and keep the physical copy filed somewhere safe.
Not claiming all your allowable expenses may mean paying more tax than you need to. Even the smallest business has expenses and it all adds up, so keep an accurate record of everything your business buys.
5) Not hiring a bookkeeper
Business owners often put off hiring a bookkeeper until they’re in such a mess they have no other option. It’s easy to see a bookkeeper as an expense your business can’t afford but if it helps you avoid making the above mistakes, it’s worth the cost.
You should hire a bookkeeper because they will save you time and money; they will rid you of unnecessary worry; and they will help you understand your numbers.
If you want to know more about why you should hire a bookkeeper, read this.