Accounting is one of the few aspects of business where technical expertise is necessary. You can learn branding, marketing, management, and even sales on your own and grow your skills as your business grows. However, you can’t rely on this for accounting.
As your sales and expenses increase, it becomes increasingly harder to keep a record of everything, let alone account for everything. Accountants train for years learning business math, different bookkeeping software, tax policies, and techniques to analyze large amounts of data. If you have been struggling with accounts lately, hiring accounting services for small businesses in London is the simplest solution.
Accounting mistakes and errors are unavoidable if you aren’t trained as an accountant. Here are the most common mistakes people make.
The Top 6 Accounting Errors Small Businesses Make
1- Overpaying Taxes
Many errors result in you paying more taxes than you have to. For example, it’s too common to mistakenly place a transaction in the wrong classification when you’re manually or with simple bookkeeping software. Inconsistencies in books are also common. For example, you may mistakenly classify a transaction in one column that was classified in some other column the month before. This makes tax accounting harder at the end of the year
Making errors in self-assessment tax returns is another way you may be losing money. When analyzing your books and filing tax returns, you must consider all the tax relief and tax return policies. When you only have to do this once a year, it’s hard to rely on yourself not to make errors. We recommend hiring self-assessment & tax returns consulting services instead.
2- Mixing Business With Personal Finances
Many small business owners find it easier to use the same bank account for their business and personal finances. They often pay for their expenses with the cash inflow from their business and often pay for their business expenses from their other sources of income. However, business tax policies differ from personal finance tax policies. Mixing business and personal finances make it difficult to do tax accounting.
Keeping the same accounts for business and personal finances may not be a bad accounting vice if you’re a sole trader. However, if your business is a limited company or has any other structure, it can make accounting a nightmare. If you own your business, we recommend consulting with an accountant in London for self-employed business runners.
3- Not Filing For Self-Assessment Tax Returns in Time
As a small business runner, you must know the deadlines for self-assessment tax returns. You also have to pay all your due taxes before the deadline.
You have to pay penalties if you fail to file your tax returns on time. Once you miss the deadline, you have to pay £100. After this, each day you miss adds £10 to your penalty for 90 days. You must pay 5% of your tax dues if you’re six months late. If the 5% of your tax dues amount is lower than £300, £300 is added to your penalties. The same amount is added when you’re 12 months late.
There are also penalties if you pay your tax bills late. You end up having to pay these high penalties just because you forgot. We recommend outsourcing chartered accountants in London to keep track of your taxes and tax returns. This will save you a lot of money in more than one way.
4- Not Keeping Accurate Records of Invoices and Expenses
Cash outflow is harder to track than cash inflow, even for larger businesses. Still, you need to keep accurate records of everything. This is because it’s far easier and less time-consuming to add an accurate record than trying to balance inaccurate books at the end of the month. You may end up spending hours trying to catch an error that could’ve been avoided with little more attention.
If you outsource chartered accountants in London, you’ll have to pay your accountant for the extra hours they have to put in. However, there are smarter ways to avoid this problem than just being more careful with bookkeeping, which is the next most common mistake small business owners make.
5- Not Using Automated Solutions
Many automated software solutions are designed with small businesses in mind. Unlike professional software systems that only trained accountants can use, these software solutions make record keeping easier for everyone. Some bookkeeping software solutions even allow you to upload pictures of your expense receipts, so you have a digital record even if you don’t have a digital recipe. This means you can access recipes directly from the accounting platform.
You’ll still need to outsource accounting, self-assessment, and tax returns consulting services, but these software solutions make everyone’s job easy. If you don’t know which software will work best for you, ask your accounting consultant for suggestions.
6- Not Consulting With Accounting Services
Almost all small businesses need an accountant. However, many small businesses don’t need to hire an accountant for a full-time role. Many small businesses also can’t afford to hire an experienced accountant that can help with other business operations through management accounting. The solution is accounting consultants.
At IBISS & Co., we’re a reputable provider of accounting services for small businesses in London with over 25 years of experience in the industry. We’re also a leading provider of self-assessment & tax returns consulting services.
Want your accounts handled professionally by accounting and tax consultants in London? Get in touch for a free quote now!
About the Author
The author is a professional accountant associated with an accounting firm in London and actively works for different clients. The author is also an accounting and tax educator who writes educational articles for different websites.