Accountancy can be very complex, but if you are a small business owner it is important to make sure that good, accurate financial accounts are a priority.
Sure, taking business accountancy seriously can be scary (and let’s be honest; a little dull!), but it is an essential part of any thriving business. Even if you outsource your accountancy, there are still certain things you should be doing to make sure that your records are correct and in order.
Do you want to make sure you’re not making any accountancy blunders? If so, here are the most common accountancy errors that small businesses make.
1. The Main Accountancy Errors For Small Businesses: Procrastinating
One of the main accountancy errors new business owners make is procrastinating. Waiting too long to organise and submit their financial information can result in fines or tax issues. In fact, if you wait too long it could even end in bankruptcy, so it is important to stay on top of your accounts.
Make sure that there is a clear record of all business related payments and expenses long before tax season. This means that any accounting mistakes are less likely to go unnoticed, and it also means you won’t have a mad rush getting everything in order so that it is submitted in time.
2. Mixing Your Business And Personal Banking
If you are a sole trader or a freelancer you are legally allowed to use your personal bank account for your business, but this isn’t always the best idea. This is because using the same account can make it difficult to differentiate person and business expenses, so you are more likely to make an accountancy blunder. For example, it can be very confusing going back and trying to work out which transactions were personal and which were business related! It can also be extremely time-consuming, which can lead to stress and burnout.
3. Trying To Do It Alone
You may be tempted to try and do your business taxes alone, but if you have no experience with accountancy it could be a bad idea. Many small business owners try to do this to keep their costs down, but in reality it often slows them down and affects their overall financial health.
A qualified accountant will not only complete the businesses taxes quickly and accurately; they will also help the business owner to take advantage of any relevant tax breaks. This can significantly reduce the final bill, which is ideal for small businesses who are trying to spend less.
If you want accounting support, we can definitely help. Send us a message to find out more about the bookkeeping services we offer small business owners!
4. Not Understanding Metrics
New small business owners can often confuse certain metrics (such as net profit, cash flow and revenue). This can lead to both overspending and inaccurate financial records, which can cause serious trouble for their business. So if you want to do your own accounts, be sure to learn about certain metrics first (although we strongly suggest hiring a qualified accountant to do your records for you).