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Accounting Mistakes You Can’t Afford to Make

 

 

By Business Desk

 

 

Tuesday, February 6, 2018.

 

 

Every business has its fortunes tied directly to its money. Even if it’s not the reason you started a business, it is the lifeblood that keeps the doors open, the lights on, and the website running. So, there really isn’t a reason that so many business owners are prone to the following accounting mistakes. Here, we’re going to look at just a few of the most common mistakes that can end up costing you a lot of money and perhaps even the business.

 

Failing to take bookkeeping seriously

We’ve all heard of the disdainful way that some people refer to accounting as “bean counting”, and how it’s not worth the time spent on it. That’s one of the most dangerous attitudes to have, and if you fall behind on your bookkeeping, you are handicapping your business. You are missing the financial information that can help you make better choices, you may be missing figures that factor into your taxes and more. Don’t take a blasé approach to your finances. Keep a bookkeeping schedule dictating the tasks you have to do every day, week, month, and year to ensure you never fall behind.

 

Not tracking overheads

One of the tasks that are most commonly forgotten is the necessity to track your overheads. Overheads are your most regular expenses, covering things like utilities, internet costs, services and software you are regularly subscribed to. They might seem like a fixed cost, but they can change over time and more than you think. Utilities can vary wildly depending on how you run the business, whereas the services and software you use can see a price hike and you might very well miss the email telling you that fact if you have them on auto-renew. You have to take a closer look at your overheads every month to ensure they’re consistent and, where they aren’t, you have to update your budget and perhaps decide whether you need a more cost-effective alternative.

 

Mixing up the future and the present

It is important to track not just the money you have now, but the money you expect to have in future. For instance, if you’re waiting on invoices or you’ve taken on a contract that promises a certain amount of profit, but you won’t receive it until the job is done, you should make a record of that. However, don’t make the mistake of mixing your future profit accounts up with your existing cash flow. Your cash flow should tell you exactly how much money is in the business and should line up 1-to-1 with your bank account. If you find any discrepancies, fix them. Otherwise, you may mistakenly think you have more money in the bank account than you do and end up spending money that you don’t actually have yet.

 

Neglecting small expenses

Just like your overheads, the smaller expenses can climb up over time. This is especially true if you travel a lot or meet a lot of clients for your job. The cost of every flight, drive, lunch, and so on can eventually pile up to make quite a difference to your accounts at the end of the year. But without the right expense tracking tools, you could be entirely unaware of this. Not only will this result in the discrepancy as mentioned above. If you’re not keeping receipts and other records of expenses, you might be missing your opportunity to take advantage of certain tax breaks, as well.

 

Handling it all yourself

The truth is that, as important as your accounts are as vital as it is for a business owner to have some financial chops, taking on your accounting entirely by yourself is unwise. Choosing a chartered accountant for your business has several perks that you would be unwise to flatly dismiss. For one, they can take a lot of the time and the effort out of bookkeeping and preparing your taxes. What’s more, they aren’t just bookkeepers, they are legally qualified to give you tax advice that non-chartered accountants can’t. What’s more, they provide all sorts of information and advice, taking a closer look at your books to inform future decision making, loan application, business plans and so on.

 

Filing taxes wrong

If you haven’t been using an accountant, there’s a good chance you haven’t been doing your taxes properly. What’s more, the temptation is there, and is easy to understand, for a business owner to fudge their taxes a little here and there in order to end up in a better position. However, little changes here and there can eventually end in a big VAT fraud investigation or some other sort of visit from the HMRC. If that happens, you are beyond the help of an accountant and you’re more likely to need the services of a tax lawyer instead. Of course, it’s better to avoid that possibility altogether, but it’s a good idea to have some help on hand in case you ever have any run-ins with the taxman.

 

Failing to manage debt

Just as dangerous as mishandling your taxes is mishandling your debt. Debt is a factor of life for most business owners. Business loans, credit cards, services they have to finance, there are few companies without debt. But don’t get too complacent with it. If you fail to come up with a debt repayment plan as soon as you take it on, it’s easy for it to get out of control. There are business debt hotlines that can help you create a plan to start repaying or to help you find your way out a debt spiral when it gets out of control.

 

You might be able to fix an accounting mistake here and there, but if they keep piling up, they can result in serious legal action or simply such an accumulation of losses that your business collapses from within. Give your accounts the attention they deserve and don’t avoid investing in some legal help when you’re faced with tax, VAT, or accounting matters you don’t understand.

 

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Accounting Mistakes You Can’t Afford to Make

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