Making bookkeeping mistakes is fairly common, especially if you’re trying to do it when running your own business. An unexpected phone call or other distraction can mean you lose track and add data into the wrong section!
There are ways to avoid making mistakes, which will save you time and hassle later. So here are our tips.
6 ways to avoid making bookkeeping mistakes
1. Build a team
The temptation in any size of business is to save costs by doing things in house. But you pay an accountant for a reason – and it’s not just to ensure your returns are filed on time. Whether you’re big or small, it’s always a good idea to seek advice on how to keep records, maintain your books and follow best practice in the areas of financial bookkeeping. At Concept Accountancy, we can look after your books, so don’t go it alone! It’ll save you lots of hassle and potentially lots of money along the way.
2. Use software
The best accounting software, such as Xero, is easy to use but often takes time to get used to. Adapting to modern and contemporary methods can sometimes seem unnecessary. But they always pay off and will save you time and money. Accounting software can be tailored for your organisation. There are often hidden features that you might not be aware of, so tap into the advice and let the software work its magic! Here’s why we choose Xero.
3. Keep receipts
The temptation is to throw receipts away. Who wants a piece of paper laying around in their wallet or car? No, me neither! But receipts – big or small – can save you a lot of money. It’s wise to keep every receipt, even if it’s not a legal requirement. With apps and software, all you have to do is take a photograph of your receipt and you can store them on the cloud. This will also help you keep a better track of what you’re spending.
4. Reconcile bank statements
The key to strong bookkeeping is to make sure the books and the bank statements sync at the end of every month. The more often you do the books, the sooner you will pick up mistakes. Now most things are electronic, it makes life much easier! Bookkeeping software and online bank statements to talk to each other, so that takes hassle out of picking through numbers. But it’s absolutely vital the two components sync otherwise the books won’t add up!
5. Know your assets
Items are often treated as business ‘assets’ if they will last more than a year or of a value more than £200. These items should go into an asset category, not an expense. They are something that the company owns, so that should be documented. For example, if you get a new laptop this would be down as ‘technical equipment’ or something similar, not as a general expense.
6. Dividends v wages
A classic mistake for owners to make is to classify payments to themselves as ‘wages’. Unless they are via a payroll scheme (i.e. you’re employed), then money paid to directors is classed as a dividend payment (limited company). If you are a sole trader these payments are ‘drawings’. There can be complexities around director’s loans, if you’ve loaned the business money to start up, which is the case for many owners. This is another reason why getting some expert advice!
If you want help with your bookkeeping and accounts, contact our team today for a no obligation discovery meeting.