The 5 Most Common Bookkeeping Mistakes in UK Accountancy made by Clients
Bookkeeping is an essential part of running a business.
It helps you track your income and expenses, manage your cash flow, and comply with tax laws.
That being said, even the most careful business owners can make mistakes, so here are the 5 most common bookkeeping mistakes in the UK made by clients:
Not keeping accurate records. This is the most common bookkeeping mistake, not just by clients but by inexperienced finance staff too. Not keeping accurate records can lead to inaccurate financial statements, which then can make it difficult to make informed business decisions. To avoid this mistake, it's really important that you keep all of your financial records in one place and to update them regularly. This includes receipts, invoices, bank statements, and any other documents that support your financial transactions.
Not reconciling accounts. Reconciling your accounts means comparing your bank statements to your bookkeeping records to make sure that they match. This is an important step in ensuring the accuracy of your financial records. To reconcile your accounts, you'll need to download your bank statements and match the transactions in your bookkeeping software. If there are any differences, you'll need to investigate and correct them.
Misclassifying expenses. This can lead to inaccurate tax returns and financial statements. To avoid this mistake, it's important to understand the different types of expenses and to classify them correctly. You can find more information about expense classification on the HMRC website or ask your bookkeeper or accountant if you are not sure which code to use.
Not using the correct accounting software. If you're using the wrong accounting software, it can make it difficult to keep accurate records and to generate accurate financial statements. To avoid this mistake, it's important to choose accounting software that is right for your business. There are a number of different accounting software packages available, so you should be able to find one that meets your needs. The most popular ones on the market today are Xero, QuickBooks and Sage, but whichever you choose, you'll need to make sure it's MTD ( Making Tax Digital) compliant.
Not hiring a professional. If you're not comfortable with bookkeeping, it's a good idea to hire a professional bookkeeper. A bookkeeper can help you keep accurate records, reconcile your accounts, and file your taxes.
How to Avoid Common Bookkeeping Mistakes
There are a number of things you can do to avoid common bookkeeping mistakes. Here are a few tips:
Get organised. Set up a system for keeping your financial records and make sure that you update them regularly. This could involve using a physical filing system, a cloud-based accounting software, or a combination of both.
Reconcile your accounts regularly. This will help you catch any errors early on. You can reconcile your accounts manually or use accounting software to automate the process.
Misclassifying expenses correctly. Take the time to understand the different types of expenses and to classify them correctly. This will help you ensure that you're claiming the correct tax deductions.
Use the correct accounting software. Choose accounting software that is right for your business and that will help you keep accurate records. There are a number of different accounting software packages available, so you should be able to find one that meets your needs.
Hire a professional. If you're not comfortable with bookkeeping, hire a professional bookkeeper. A bookkeeper can help you keep accurate records, reconcile your accounts, and file your taxes.
By following these tips, you can help avoid common bookkeeping mistakes and keep your business's finances in order.
One tip that I always give to clients with an iPhone, is to open up a new note and click on the camera icon at the bottom and then select scan document, and you can use this to quickly scan and email the receipt or invoice to your accounting software or person.
Remember bookkeeping is an important part of running a business. By avoiding common bookkeeping mistakes, you can help ensure the accuracy of your financial records and make informed business decisions.