Five Bookkeeping mistakes you can easily avoid

posted by 7 years ago in Guide

This post was provided by Crunch, the online accounting solution for freelancers, contractors and small businesses. 

The laundry just needs doing… that cobweb in the shed just needs removing… I just need to finish watching Kerry Katona’s Celebrity Wedding Planner

It’s true, people will do any old rubbish to get out of bookkeeping. But it doesn’t have to be a brain-numbing, time-guzzling affair; especially if you follow these simple but effective tips:

1) Ditch the pad and paper

Come on, it’s 2015, what are you doing with that calculator? Making the shift to digital bookkeeping software will take you next to no time and will make your life a lot easier. It doesn’t have to be anything fancy – spreadsheets work just fine for beginners.

Not only will your document be accessible from anywhere, on any online device, but the in-built data processing means no more sitting at a desk cursing your younger self for not paying more attention in maths class.

2) Separate work from life

Rome wasn’t built in a day, as they say. Neither was your business, and as a result you still might be in transition from regular joe to fledging business owner. But if you’re in a position where you’ll have to spend any time at all bookkeeping, make sure you get a dedicated bank account for your business and avoid using your own money to pay for company expenses.

Yes, it appears easier at first to just use one card for everything, but as your business gets busier, it’ll definitely get a lot more bothersome having to rummage through and decipher all the bank statements, splitting out all your personal and business spending.

3) Keep Your Receipts

HMRC may come a-knocking asking to see receipts, and you’ll be in seriously hot water if you don’t have anything to provide, so make sure you’re militantly keeping receipts for business expenses.

Designate a separate place for your receipts so they don’t get mixed up with the old worn-out ones in your wallet. Taking a picture on your phone and storing the images is deemed acceptable, and a much better way of recording your outgoings than trying to keep hundreds of tiny bits of paper in the same place, in the right order.

4) Don’t leave it all to the last minute

Always remember the P’s: “Proper preparation prevents poor performance”. Like any task, bookkeeping is far less confusing if it’s done gradually over a longer period of time. While it’s incredibly easy to give precedence to more hands-on (read: more interesting) tasks, running your own business can be a short lived venture if your accounts are a mess.

Of course, this advice didn’t stop 21,027 self-employed individuals from submitting their tax returns between 11pm and midnight on deadline day in 2014, according to HMRC. Think of all the stress and lost custom these folks put themselves through, all the while wondering why they didn’t start sooner.

How much time you deem sensible to get all your paperwork in shape is up to you. A quick few minutes every day, or a designated time slot each week are good practice. As per the aforementioned P’s though, failure to sort it out in a timely fashion could result in you paying more tax than necessary, or even worse, being penalised for tardiness.

5) Leave it to the professionals

Getting all the records in order might be insanely boring, but it’s also the easy part. An accountant will make sure you don’t end up unknowingly breaking complex taxation law and ending up with fines coming out of your ears.

It’ll always be tempting to try and keep your operation down to as few heads as possible, so it’s understandable why so many self employed people try to take care of everything by themselves. As most discover, though, keeping all the finances in check as your business grows is not just a real pain in the neck, it also gets in the way of your actual work.

It makes sense to consider appointing an accountant the moment you’re toiling over the paperwork costs you business. By putting an expert in charge, you’re freeing yourself up to run your business how you imagined it would be without all the complicated number crunching getting in the way.