So you’ve got a new business and you’re raring to get things going. You’re probably flush with excitement and wondering how to get your product or service out into the hands of the people who need them. The last thing on your mind will be bookkeeping.
But it shouldn’t be. If you don’t lay a solid foundation for your accounts process at the beginning, it can result in a game of catch up that causes real problems down the road. If you don’t keep an accurate track of your incomings and outgoings then tax returns and accounts filing can become a real headache.
There are bookkeeping service providers out there to help ease the pain for you, but of course, you might decide to do it yourself before handing over to your accountant.
Here are five common bookkeeping errors you’ll want to avoid.
1. Getting Backlogged.
This is the first problem many start-ups encounter. In the rush to get everything ready and launched, expenses aren’t tracked and receipts are tossed into a file and shoved up on a shelf somewhere. This is especially true during the first year, when you’re often purely focused on forward momentum and might let your bookkeeping fall by the wayside. Then, when the time comes to file that tax return, the heat is really on.
Make sure you get your bookkeeping system set up before you start and allocate regular time each week or even every day to keeping things up to date.
2. Not Learning To Use Bookkeeping Software.
So you’ve actually thought about your bookkeeping process, that’s good. But make sure that you choose the right software for keeping tabs on things, and crucially make sure you learn how to use it. Most firms that offer bookkeeping services in London will be able to help you select a package, teach you how to set it up, and use it properly for a small fee. It’s well worth the outlay if you’re not sure how to proceed as it’ll pay for itself many times over in saved hours.
3. Failing To Keep Receipts. It’s all too easy to forget to store receipts for those small day to day expenses: petrol, stationery, food when out on a client meeting. But if you claim tax back against them but don’t keep them filed safely, should HMRC ask for proof you could be in trouble. HM Revenue & Custom’s website has more details on record keeping here.
4. Mixing Up Business And Personal Accounts.
Remember that your personal banking and business banking should be kept totally separate. Don’t use your own card to pay for a business expense, no matter how tempting. You can only claim for legitimate business expenses so make sure you keep everything separate so as not to get mixed up further down the line and risk a run in with HMRC.
5. Not Conducting Bank Reconciliations.
Not the most thrilling of bookkeeping processes, but regular bank reconciliations are a must if you’re going to run a tight ship. It involves checking your bank statements off against your accounting records. A laborious procedure for sure, but vital if you want an accurate state of play. This will let you catch any errors in reporting and see if you are losing cash in unexpected places. Reconciliations also help with detecting potential fraud from within the company.
These five mistakes are easy to make, but are also easy to avoid if you make sure that you give your bookkeeping the attention it deserves.
Have you encountered any of these yourself? What tips would you add?