Most business owners are busy, we understand that and to be honest isn't everyone...
Positive Practice sees the same basic mistakes being made almost every week, so instead of just point them out to the individuals we see in a mess here for all business owners are our 5 common but deadly "accounting" mistakes. But before you stop reading and think I'm not an accountant so accounting mistakes in my business aren't my problem, THINK AGAIN, it's your business and you need to know how to get the best from it.
Anything but the boring bank reconciliation
It's easy to let this one slip as you've more important jobs to do. But by reconciling your bank account(s) on a monthly basis you will more than likely prevent a serious headache down the road. Try scheduling in an appointment with your bank account once a month (on a date just after the posted bank statement hits the office carpet). You'll be able to reconcile discrepancies quickly, detect any over payments and also know your books reflect what is really happening in your bank account.
Using a shoebox (or worse) for your receipts
OK, if you've got no more than a dozen purchase receipts a year (sure you've not just got a hobby??). Take 15 to 30 minutes a week to organise your receipts and also make a note of when, where what and why on those scrappy bits of paper (aka hand written receipts) you've collected. At the end of the year you'll thank yourself (and your accountant will be, well, less frustrated)
Tracking expenses on a regular basis, well this actually goes for nearly all aspects of business accounting, will give you a firm grasp on your cash flow and thereby peace of mind.
Not understanding the difference between cash-flow and profit
CASH-FLOW, is the total amount of money being transferred in and out of your business from such as; sales, investments, operating expenses and debt payments.
PROFIT, is what remains from the sales revenue after your business expenses are subtracted.
By keeping a track of the actual money you are spending versus the actual money coming into the business you can get a clear picture of the financial health of your business and also become aware of any potential problems around the next corner.
I think this idea needs a whole blog just on it's own so I'll be putting my thoughts out on this more soon
Mixing personal and business accounts (money)
If you're not already using separate personal and business accounts, start doing so NOW.
HMRC say that you must be able to distinguish between your own transactions (eg your weekly supermarket shopping or your home insurance bill) and your business's when it comes to preparing accounts for your tax returns. Also remember if you mixed personal and business in the same account you'll be paying your accountant to sort out what is allowable or not (and you'll likely be paying more for keeping poor records).
If your business is a limited company then the company is a separate legal entity from the owners so will certainly need its own bank accounts in the name of the company (with any trading name noted also).
Not learning to use simple accounting software
Keeping your finances in order might take a little effort and a bit of time each week but you'll be well rewarded. You'll have a firm grasp of your numbers, you'll know what level of profit your making (or not), you'll be able to see if you're pricing your goods or services at either a lose or a profits and is that price bring enough profits into the business to cover the costs of the business and give the owner of the business a worthwhile return for their time and efforts.
Yes you can keep "manual" records but do these give you an easy way of getting at the real numbers you need to manage your business, the reports available from almost every accounting software package (or cloud based system) are designed to give you the information you need to run your business better.