10 Bookkeeping Mistakes That Small Business Owners Make

You launch a small business, and suddenly you need to become a whizz at bookkeeping, it’s all a bit much really, and it’s no wonder people make mistakes. Well this month, let’s take a look at the 10 biggest bookkeeping mistakes that small business owners make, and see how we can avoid them.

  1. Not researching the legislation

Within the UK it’s actually quite easy to find the legislation, it’s all on the HMRC website. The interpretation of the legislation can be a bit harder to get right, and sometimes finding a black-and-white yes or no, can prove impossible. Make sure you research the legislation, then clarify it by asking an expert.

2. Not knowing your start date

It’s important to note down your start of trade date. As you will need to keep books from that point. Of course, if you’ve not noted it down, this might panic you a bit, but fear not, I bet you put it on social media. Just scroll back and take note of the date you launched. From this point, set your systems up and start keeping your books up to date.

3. Not starting early

No I don’t mean, not biting the bullet and starting your business early, I mean not getting started with your books early. Getting set up, having a routine and taking action to keep them up to date from the start is crucial. A backlog causes panic, confusion and complications. Get started early, take note of your receipts, invoices and sales early on. Then you’ll be off to a great start and you will make sure you maximise your profits and your business success.

4. Duplicating transactions

This is easily done and often missed, even if you are using software to support your bookkeeping. Sometimes a transaction may be added automatically, and we add it manually. Other times it may be added into software from more than one source (e.g. a payment gateway and our bank account) or we may add it to our paperwork more than once by mistake. This is why it’s crucial to keep up to date. To check each month with bank reconciliations. Because we are more likely to notice anything we have confused as it will be fresh in our minds and because if we reconcile each month, we won’t have to trawl back over months of accounts to find the error.

5. Inputting errors

Because we all make mistakes, right? This is more common if you are bookkeeping manually using a spreadsheet or ledger, but it can happen with software too. It’s another argument for regular checks and reconciliations as errors are more likely to be picked up when they are fresh in our memories.

6. Getting Personal

Sometimes we can feel that bookkeeping is a personal criticism. It’s not. We need to take a step back, see it as what it is – a clinical process. Don’t take any of it personally, use it as a tool to inform you, to help you make decisions in your business, to budget…but never as something to take personally. That way you’ll find it easier to separate personal and business banking. Remember, this is YOUR business, but it is a business.

7. Not Keeping Receipts

This may sound basic, but you’d be surprised how many people don’t keep the receipts. If you don’t have receipts, it can be hard to claim expenses, especially if you are audited. That doesn’t mean you need to keep a folder or box full of paper. In fact, I encourage you not to, as receipts can degrade over time. Photos are fine. Take a photo, or download the invoice and keep it in a cloud-based filing system, or straight within your bookkeeping software. Essentially it doesn’t matter how you keep your receipts, just make sure you keep them.

8. Confusing expenses

The rules for expenses within the UK are quite straightforward, they must be wholly and exclusively for the business. Of course, there can be times when you can claim a percentage. We also have options for simplifying expenses and claiming a more comprehensive amount. You want to maximise your expense claims to support your profits. You can find out more about expenses here.

9. Missing a system

Failure to prepare is preparing to fail. Like it or not, having a system and sticking to it is key to bookkeeping success. It doesn’t need to be onerous or time-zapping, it does need to be consistent and you do need to hold yourself accountable to it. There’s also no right or wrong system to use, but there is one that I recommend.

10. Not asking for help

This is really common, especially in the UK, we are guilty of sticking our heads in the sand, or putting on the stiff upper loop and battling through when things are hard. But actually, asking questions, and getting help is not a sign of weakness, it’s a sign of strength. After all, you won’t grow if you don’t know what needs to be done. Dig deep, ask for help when needed, and don’t panic it will cost less than you think, quite often the help is even free, just like in this blog!

So there you go, now you know the 10 biggest bookkeeping mistakes that small business owners make and you can avoid them all! Don’t forget, I’m here to answer any problems if you need help and if you need accountability or affordable training, then check out Handmade Accounts-Ability too.