When thinking about doing your own bookkeeping, there are a lot of things to consider that ensure you remain compliant and have accurate figures to allow you to make quick, informed decisions. Without the assistance of a qualified accountant or bookkeeper, there are a few common bookkeeping mistakes you can make that have the potential to create major problems if not rectified on a timely basis.
Gone are the days when you would have to manually enter transactions into your bookkeeping software.
By using the automated bank feeds feature within the software, transactions are automatically downloaded for you to categorise. That way, you have more accurate figures and extra time to spend on your business instead of inputting information manually.
Many people think that once bank feeds are in place and transactions have been categorised that’s all the bookkeeping required in their business.
Carrying out regular bank reconciliations ensures that the transactions in your software agree with those in your bank account and any differences are looked into as quickly as possible.
Whilst bank feeds are usually reliable, it has been known for them to omit or create duplicate transactions.
These transactions would be found by the bank reconciliation and, if not corrected, could make your reports unreliable and mean your VAT has also been miscalculated.
VAT rules are complicated, and many business owners doing their own bookkeeping could incorrectly claim VAT on some transactions.
If this continues over a longer period of time, the VAT involved could become a large amount owing to HMRC, with interest and penalties also potentially payable.
Errors such as claiming VAT on insurance costs, VAT on company car purchases, and leases are just a few examples where mistakes can prove costly.
Many people start their business not being VAT registered. If your sales grow, you will need to keep track of your “taxable supplies” for VAT purposes in case you need to become VAT registered.
Finding out that you should have been VAT registered too late can be a very costly mistake!
All good bookkeeping software around today can send automated reminders when your sales invoices become overdue.
We have seen many customers who don’t pay until reminders are received or invoices are chased.
This simple task can improve your cash flow and reduce your exposure to unrecoverable old debts.
You may think when categorising your transactions that the quick and easy way is to allocate most expenses to sundries or miscellaneous in your bookkeeping software.
This may be the case at the time. However, it can cause you issues in the long run.
Firstly, your accountant will need to ask what the expenses relate to when preparing your year-end accounts so that they are allocated correctly. This means you will have to spend time going back and looking into each transaction.
Another issue is that you won’t have accurate reports available as quickly from the software. You also won’t be able to track your expenses effectively and take action if, for example, a direct debit subscription is no longer required.
It’s always easier to ensure expenses have been allocated to an appropriate account straight away to avoid any problems in the future.
Bank rules should be used so that the system automatically recognises the transaction the next time it occurs. This means less manual inputting and ensures expenses are allocated in a more uniform way.
Many business owners think they are able to carry out the bookkeeping for their business themselves. They think that doing so will save them the cost of their accountant doing it for them.
However, due to the complexities involved, the costs involved in rectifying any errors could be far higher.
Having a qualified expert carrying out your bookkeeping for you gives you peace of mind that everything has been taken care of in the correct way.
It also ensures you have accurate information to enable you to make informed decisions and grow your business. Plus, it frees up more of your time to spend either working on the business or for more quality time for family and hobbies!
If you would like to discuss how we can help avoid these common bookkeeping mistakes, or if you have any questions on anything mentioned above please get in touch. We will be more than happy to help!