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Common Accounting Mistakes Small Business Owners Make

Mon 3rd Sep 2018

Accounting is part of every business, whether you are a one-man band or a larger organisation, the need for it to be accurate is essential. Accounting is not something that only matters if you’ve got time, it matters all the time, especially when you’re reporting to HMRC!

Therefore, ensuring that your accounts are managed efficiently, accurately and on time is important to any business owner and if you’re unable to manage this yourself, it could be worthwhile outsourcing your accounting to ensure accurate measures are being used.

What mistakes do small business owners make? Here are a few examples:

Not taking bookkeeping seriously enough

Just because you are a small business does not mean that your accounting is not important. Making sure that you can account for every penny will ensure that you are keeping track of where your business stands and the financial position you are in. By performing a monthly health check on your accounts and categorising everything in detail, you’ll be able to plan for the future and know the direction your business is going in.

Reconciliation

Your bookkeeping needs to reconcile with your bank statements. Leaving this task for long periods of time will make it harder to stay on top of your true financial status and lead to entries being forgotten or transactions being incorrect. A good routine is to reconcile accounts on a monthly basis so at least you have recollection of what’s been happening over that short period of time.

Assigning budgets

Creating and setting budgets for different aspects of the business should be part of your business plan and always makes good financial sense to do so. Failure to assign budgets can lead to overspend and loss of income. It can also make it harder to establish a boundary on projects and as time goes on, jobs can cost more money than expected, leaving you in a negative position. Knowing how much funds you have allocated for each project will give you clear guidelines on what to expect.

Failure to follow accounting procedures

A one-man-band or small business may not have the expertise or industry knowledge to know what procedures should be followed for their business. It’s a good idea to document all tasks, including bookkeeping and accounting procedures and other routine tasks.

Backup

Your accounting software should have a backup function within it and it’s important to use it! Failure to do so could result in months’ worth of data being lost. Usually this can be set to automatic so the need for remembering to backup isn’t necessary however it is always good to randomly check the backups to ensure that they are being performed correctly and capturing the right data.

Taking on too much

Small business owners can only do so much, especially if they are solo workers. Therefore, it’s important to make the most of help that is available in make your working life both easier and more productive. Outsourcing accounting is one area of the business that makes sense to hand over. Unless you have a head for figures and enjoy managing all that it entails (and you have the time), it is best left to the experts. Accountants have all the correct, up to date equipment and knowledge to hand and they do not need to fit the task in around other jobs, accounting is their job! You can be assured that your accounts are in good hands while you focus on parts of the business that you actually enjoy and can be productive in.

If you’d like to find out about our accountancy services here at 2020, we’d love to chat with you. We specialise in accountancy services for freelancers, sole-traders and Limited company contractors, if that’s you, get in touch!

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