Common mistakes of small business bookkeeping

Everybody makes mistakes. It’s one of those inescapable parts of being human. 

That said, some mistakes are far more costly than others. And when it comes to your business’ bookkeeping, mistakes can cost you time and money.

Most bookkeeping mistakes are easily avoided if you know what to look out for. And we’re here to help you do just that by talking about the most common mistakes of small business bookkeeping. 

Specifically, we’ll be talking about these mistakes:

• Not keeping track of your income
• Not keeping track of expenses
• Trying to do it all yourself
• Using your business account for personal expenses
• Data entry errors 

It can be easy to think small amounts of income don’t matter that much, but it all adds up. Recording small amounts will make sure your books are a true reflection of your accounts. It’ll also keep you out of trouble with HMRC; they’re not the biggest fans of undeclared income, no matter how small. 

A large number of customers don’t pay fees immediately. Instead, they agree to pay over a time frame set by you. This is recorded as accounts receivable in your books. 

Even though the cash isn’t technically there yet, the amount to be paid should still be recorded, and will count toward your taxable income. 

Accounts receivable can be a little confusing for small business owners. If you’d like more information about accounts receivable, and how best to deal with it, check out this article. 

There are loads of expenses that can be claimed back from HMRC when completing a self-assessment tax return. This means they’ll be deducted from your total taxable income, so you’ll end up paying less tax.

For small business owners, in particular, there are a lot of expenses that can be claimed. Common tax-deductible business expenses include:

• Bank fees and interest
• Rent
• Utilities
• Insurance
• Company car
• Equipment or equipment rental
• Software
• Supplies
• Membership fees
• Meals
• Travel
• Subscriptions
• Advertising
• Legal fees
• Maintenance and repair

Even if you’re working from home, you can claim tax relief on any expenses that are vital for your business operation. Things like:

• Home office space (as long as this is your main place of business)
• Mortgage interest
• Security system
• Property taxes
• Maintenance, repairs or upkeep
• Business phone line (separate from the home line)
• Insurance

If you need any more information about tax deductible business expenses, check out our article. 

The flipside to accounts receivable. Accounts payable are any money you owe for goods and services you’ve already received.

Even though you’ve not paid for them yet, accounts payable should still be recorded in your books. If you don’t record it straight away, your accounts will show money that’s technically not there. 

If they’re recorded, you can also claim them back as business expenses on your tax return. If you need a little more help getting your head around accounts payable, check out this article. 

Accurate bookkeeping takes time, care, and attention to detail. We’re not trying to imply you’re not capable of doing it, but you’ve got a business to run! 

And, as your business grows, your accounts are going to get more difficult to keep track of, so the chances of mistakes are only going to increase. 

It could be worth hiring an accountant to keep track of your bookkeeping. If you’re a small business, a full-time accountant might not be an option. But there are plenty of great accountants you can hire on a short term basis. 

They’ll help you prepare your accounts for tax returns, and give you general advice about accounting strategies.

If you’re a sole trader you don’t technically need a business account, but it’s definitely a good idea. 

If you’re registered as a small business or limited company you’re required to have one, but you should avoid using it for personal expenses. 

Muddying your business account with personal expenses will just make things way more difficult when you need to prepare your accounts for taxes, or if you’re trying to figure out long term projections. 

Again, this might sound pretty obvious but the best way to avoid mistakes in your bookkeeping is to look at your records. Lots of small business owners can avoid doing this, or leave it until something appears to be wrong.

Set aside some time once a week to have a look at your accounts and make sure everything is where it should be. Maybe you’ve been overcharged for something when you shouldn’t have, maybe you’ve forgotten to pay something you were supposed to. The only way to find out is by looking.

Doing this will also help you familiarise yourself with bookkeeping in general. Nobody is expecting you to become an accounting expert, but you should have a good idea what your finances should look like.

This one might sound obvious, but entering the wrong figures is easy to do and a huge hindrance for your books. 

The easiest way to prevent these kinds of errors is with accounting software like Countingup. Countingup’s business current account comes with built-in software that’ll automatically record all your transactions, so there’s no chance of errors. 

And when the time comes for preparing your records for tax season, they’ll be fully recorded and organised. 

The Countingup business current account makes it easy to manage your bookkeeping with one simple app. 

The app comes with free built-in accounting software that automates the time-consuming aspects of bookkeeping and taxes. You’ll receive real-time insights into your cash flow, profit and loss reports, tax estimates, and the ability to create invoices in seconds. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Find out more here.