Bookkeeping is an important part of any business. A company’s financial progress and position can easily be assessed with the help of the year end accounts or financial statements, which should have been prepared from accounting books and records. Therefore, good bookkeeping is one of the key to success for any business. Any mistakes in bookkeeping can be quite costly for a company and thus it requires due care and attention when it is carried out. If your bookkeeping is done properly it can help guide you in your decision making especially when you are planning to acquire assets, expand your business or branch out into another area.
There are a few common mistakes which some businesses make when carrying out their bookkeeping. Avoiding such mistakes can help your business to flourish and progress with less stress.
1. Many businesses do not save or record receipts that are less than £10. Though they are not for considerable amounts of money they can prove to be highly beneficial when they are all added up at the end of a year and you are claiming tax deductions for them. Therefore, make sure you keep a record of all of your business expenditure and if needs be keep a separate file for the smaller receipts.
2. If the owner maintains the books and records of the business this can sometimes be cost beneficial, however, they will need to have a sound knowledge of the bookkeeping basics, otherwise they may waste a lot of time entering the information incorrectly and consequently have to pay someone to sort out their mess. If you have no basic knowledge of bookkeeping, or any time to acquire it, then it may be advisable to hire a bookkeeper or get your accountant to look after it for you.
3. Many small business owners pay for a few of their business expenses out of their ‘personal’ money and fail to get them reimbursed from the business account. In essence there should be a clear line drawn between business expenditure and personal expenditure.
4. Lack of communication with the bookkeeper is one of the most common types of mistakes that many business owners make. Indeed, it is very important to communicate with your bookkeeper on a regular basis. There may be outstanding issues on which they need your advice, or they may be able to provide you with crucial financial information regarding an important business decision you need to make. Having regular sit-down sessions with your bookkeeper will also allow you to check whether all the accounting books and records are up to date or not.
5. Not reconciling the bank accounts, debtors, creditors, VAT and other control accounts of the business. These reconciliations are not done by many bookkeepers. However, they represent crucial checks in confirming that all the transactions relating to a particular account are complete, for instance, if a bank reconciliation is not prepared, several omissions in the cash book records for the business may be overlooked.
6. Not deducting the right sales VAT when recording invoices. Any sale invoices and sale records processed should be checked to see that the VAT amount is correct, if this has been calculated incorrectly this could lead to problems with HMRC as regards payments made to them and also problems with sales figures being incorrect in the books and records.
7. Finally, not keeping a check of petty cash funds is a major problem. Many businesses do not keep a track of petty cash expenditure and often take amounts out of the cash float without recording them. If petty cash expenditure is not monitored and controlled accurately by a bookkeeper this may lead to a business not claiming all of its business expenditure and thus it may end up paying more in business tax.
Contact us today if you think we can help with your book keeping needs