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Tuesday, 25 November 2014 10:45

Common accounting errors that are choking your small business

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As well as being one of the most important, keeping the books is one of the more difficult aspects of running your own business. Perhaps unsurprisingly, mistakes are common but accounting errors can be fatal for businesses. Here are 5 common mistakes to avoid.

Miscalculating the amount owed to HMRC under the Flat Rate Scheme

Paying the wrong amount of tax due to miscalculation can cause your business severe issues in terms of cash flow – either now if you pay too much; or later if you pay too little and get hit with an unexpected bill!

Under the VAT Flat Rate Scheme, when calculating the amount you owe to HMRC you multiply the gross amount (including VAT) not the net amount of the sales invoice by the flat rate percentage.

                                                        

Not saving receipts

How many times have you reviewed your bank statement and had no idea whatsoever what you spent that £50 on two weeks ago? Was it a business meal, supplies, petrol? Could it have been a personal expense you paid for with your business card by mistake?

Not having a record of what your money was spent on can result in incorrectly reported tax expenses and a high tax bill if you’re ever audited. So why not keep your receipts in one place and once a week, file them away. Keeping your receipts filed doesn’t have to be complicated, why not take a photo on your phone every time you make a purchase and back them up to your digital filing system once a week?

 

Forgetting to back up files

You can keep the best records in the world but if you don’t have them when you need them then what’s the point? Backing up your digital records may not seem like the most pressing concern but sometimes files corrupt and when it comes to your accounts, it’s better to be safe than sorry.

 

Combining personal and business finances

One of the first things you should do when you start a business is open a business bank account and deposit all business related income into it. When personal and business finances are combined, it can fast become very difficult to identify and separate business expenses. Putting yourself in this situation can lead you to get caught in a web of tax disputes and ultimately it just isn’t worth the hassle!

 

Failing to reconcile your books with your bank statement

Ensuring that there are no discrepancies between your books and your bank statement is one of the most fundamental accounting duties for any business. Reconciliation should be performed on a monthly basis in order to catch and correct any accounting errors quickly so that they don’t result in major financial problems further down the road.

 

Disclaimer

The information contained in this Blog is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. The application and impact of laws can vary widely based on the specific facts involved. Given the changing nature of laws, rules and regulations, and the inherent hazards of electronic communication, there may be delays, omissions or inaccuracies in information contained in this Blog. Accordingly, the information on this Blog is provided with the understanding that the authors and publishers are not herein engaged in rendering legal, accounting, tax, or other professional advice or services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser.

While we have made every attempt to ensure that the information contained in this Blog has been obtained from reliable sources, One Plus One Ltd is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this Blog is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Nothing herein shall to any extent substitute for the independent investigations and the sound technical and business judgment of the reader. In no event will One Plus One Ltd, or its partners, employees or agents, be liable to you or anyone else for any decision made or action taken in reliance on the information in this Blog or for any consequential, special or similar damages, even if advised of the possibility of such damages.

Read 1074 times Last modified on Wednesday, 05 October 2016 16:32

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