We’re pretty sure that it wasn’t the prospect of tracking expenses, generating accounts or managing the books that will have first motivated you when you started your business! But keeping on top of your accounts is vital if you wish to avoid unnecessary time and expense in bringing them up to date. Here are some of the more common mistakes made by businesses and how to avoid them.
1. Leaving it too long
Ok, so bookkeeping isn’t the most enjoyable of business tasks! After all there’s always more exciting things to do such as product development, sales and marketing. But sadly, the accounts won’t go away! Not only that but HMRC can fine you for not keeping accurate records for your business and the longer you leave it, the harder it becomes to get through all that paperwork.
We recommend setting aside at least an hour a week to do your books so that you’ll always have timely, accurate information about your businesses cash and profit situation. Not only that but having a current view of your business will help you identify issues earlier; so that you can take any necessary corrective action.
2. Inaccurate recording
We see this mistake all the time. But the better quality information you maintain for your sales and expenses, correctly categorised by accounting type, the quicker and easier it is to reconcile your accounts and the lower the costs will be with your accountant or book keeper.
Use a simple, robust system to input all of your data accurately and efficiently, and make sure you don’t make any changes in the way you log your figures from month to month. That way your accountant can easily check the figures for any errors.
3. Inconsistent coding of transactions
If you have transactions in your business that repeat regularly, such as a monthly subscription, make sure you put these in the same category each time, otherwise when your accountant comes to check that you’ve entered all your costs and claimed the maximum allowable amount for tax, they’ll have to spend extra time finding those costs that have gone into different places – which again means a higher bill for you.
So what can you do about it?
Here are our top tips:
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- Draw up a checklist of ‘tasks’ that need to be completed each and every week.
- Keep up to date with your invoices – get them out early and you’ll get paid more quickly
- Maintain a list of bills falling due for payment – it will help you plan your cash better when you know what’s due when.
- Check your bank transactions – if you don’t keep track you’ll forget what you’ve bought! If you don’t already, consider maintaining ledgers for income and expenditure.
- Track your time – even if it’s not billable. When you track your time accurately you have a better understanding of the profitability of your business, don’t miss the opportunity to invoice and can price / plan accordingly.