Six common accounting mistakes small business make

As an accounting firm based in Putney and Richmond, we’ve seen our fair share of small business owners make accounting mistakes.

These mistakes can cost you time, money, and even your business. Fortunately, they are quite easy to avoid and with the assistance of a professional accountant, you’ll never need to be concerned about making them again.

In this article, we’re going to share the top 6 accounting mistakes small businesses make, and how you can avoid them.

Mistake #1: Not Keeping Good Records

This is one of the most common accounting mistakes we see. Small business owners often don’t think it’s important to keep track of their receipts, invoices, and other financial documents. But this is a big mistake!

Good records are essential for tracking your income and expenses, filing your taxes, and getting loans or financing. If you don’t keep good records, you’ll be flying blind when it comes to your finances.

Here are some examples of the importance of keeping good records:

  • If you don’t keep track of your income and expenses, you won’t know how much money you’re making or spending. This can lead to overspending and financial problems.
  • If you don’t file your taxes on time, you could be subject to penalties and interest.
  • If you don’t keep good records, it will be difficult to get a loan or financing. Lenders want to see that you’re a responsible business owner who can manage your finances.

Here are some tips for keeping good records:

  • Get a receipt for every purchase you make for your business.
  • Keep all of your invoices and other financial documents in a safe place.
  • Back up your records regularly.
  • Use accounting software, such as Xero, to help you track your income and expenses.

Mistake #2: Not Paying Your Taxes on Time

The penalties for late tax payments can be significant, so it’s important to make sure you pay your taxes on time. If you’re not sure when your taxes are due, you can always check with HMRC.

Here are some tips for paying your taxes on time:

  • Set up a system for tracking your tax deadlines.
  • Make sure you have enough money to pay your taxes on time.
  • File your taxes electronically.
  • Get professional accounting help if you need it.

Mistake #3: Not Using Accounting Software

Accounting software can save you a lot of time and hassle. It can help you track your income and expenses, generate reports, and file your taxes. There are many different accounting software programs available, so you can find one that fits your needs and budget. We recommend cloud based accounting from companies like Xero.

Here are some of the benefits of using accounting software:

  • Increased accuracy
  • Improved efficiency
  • Reduced costs
  • Easier compliance

Mistake #4: Not Getting Help from a Professional

If you’re not comfortable handling your own accounting, there are many qualified accountants who can help you. An accountant can help you set up a sound accounting system, track your finances, and file your taxes.

The cost of hiring an accountant can be offset by the benefits of having accurate and up-to-date financial records.

Here are some of the benefits of hiring an accountant:

  • Peace of mind knowing that your finances are in good hands
  • Expert advice on tax planning and other financial matters
  • Time savings

Mistake #5: Not Planning for the Future

It’s important to plan for the future of your business, and this includes planning for your taxes. You should consult with an accountant to find out how to minimize your tax liability and make the most of your tax deductions.

By planning for the future, you can help ensure that your small business is financially secure.

Here are some tips for planning for the future:

  • Consult with an accountant to find out how to minimize your tax liability.
  • Make sure you have a plan for retirement.
  • Make sure you have a plan for the sale of your business.

Mistake #6: Not Having a Disaster Recovery Plan

A disaster recovery plan is a document that outlines how your business will continue to operate in the event of a disaster, such as a fire, flood, or cyberattack. Having a disaster recovery plan in place can help you minimize the financial impact of a disaster and get your business back up and running as quickly as possible.

Here are some tips for creating a disaster recovery plan:

  • Identify your critical systems and data. What are the systems and data that are essential for your business to operate? Once you know what’s critical, you can start to develop a plan for how to protect it.
  • Create a backup plan. This should include a plan for backing up your data and systems, as well as a plan for restoring them in the event of a disaster.
  • Test your plan regularly. This will help you identify any potential problems and make sure that your plan is up-to-date.
  • Communicate your plan to your employees. Everyone in your business should know what to do in the event of a disaster.
  • Keep your plan updated. Your business and its needs will change over time, so it’s important to keep your disaster recovery plan updated as well.

By following these tips, you can help ensure that your business is prepared for any disaster.

Why not talk to TaxAgility and see how we can help you avoid these mistakes

By avoiding these common accounting mistakes, you can help ensure the financial health of your small business. So if you’re a small business owner, be sure to keep these tips in mind.

TaxAgility has been helping small businesses in and around Richmond and Putney for many years.

Contact us today on 020 8108 0090 to learn more about how we can help you.