Learning about the bookkeeping mistakes in London Businesses is the key to identifying if you are making the same mistakes in your business or not. Bookkeeping can be complicated and errors made in the process can cripple your business.
So Let’s look at some of the most common bookkeeping mistakes often seen across London Based businesses.
Overusing miscellaneous category
Categorizing your transactions in an orderly manner when recording them is a good way for anyone to get an understanding of the finances.
One of the bookkeeping mistakes that people tend to make is adding way too many transactions under the miscellaneous category. If the category a transaction belongs to is unclear, most tend to put it down under miscellaneous.
This might be the easy way at the time. But in the long run, this might cause some issues. The accuracy of the records will be affected by this, and when preparing year-end accounts, you might have to recategorize them again.
Making errors when adding entries
This might seem like a no-brainer, but this is one of the most common bookkeeping mistakes among London Businesses. Incorrect entries in the books will mess up your calculations and can create issues.
Be careful and accurate when making financial entries in the books. If you feel any doubts, just double-check and correct any mistakes. Cross-check values with invoices and bills to get the right details. Keep in mind making mistakes when doing your books is the most easily avoidable mistake.
Errors related to VAT
If your company is VAT registered, all the invoices that you send will have VAT included. So, make sure to set aside the necessary funds to pay HMRC for VAT. If this is not done properly, you will be charged up to 15% of the VAT that you didn’t pay. Keep your VAT calculation process solid so you can reclaim some of the VAT back.
Also, be sure that you are received a VAT receipt. If not, request the HMRC for one. Be very careful when doing the VAT claiming as claiming when you should not lead to some serious implications. If you have issues regarding VAT, contact a reliable Bookkeeping service in London for help.
Collect overdue debts
Debts that people owe to your business can stop the flow of money in the business. If you have people that have overdue payments, contact and notify them about the deadlines. Bookkeeping software can tackle this easily through automated reminders to the debt holders.
The longer the payment becomes overdue, the higher the chances that it can become an unrecoverable debt. So, if you have overdue payments take steps to collect them as soon as possible to improve your cash flow.
Mixing up assets and expenses
Another one of the rookie bookkeeping mistakes London businesses tend to make is recording assets as expenses in the books. Assets and expenses affect business in two different ways, and mixing up these two can give you issues later on. If an item is of higher value and lasts more than a year, it is an asset.
Carefully consider the items of your business when recording them. So you can increase the accuracy of your books.
Not reconciling bank accounts.
Amounts in your bank account must agree with the amounts in the bank statements. If not, either you have made an error, or the bank has. Carrying out bank reconciliations whenever possible is the best way to avoid any mistakes on your side. Even in the rare case of mistakes on the bank’s side, you can identify the error with proper bank account reconciling and notify them.
Throwing receipts of transactions away
Many business owners disregard the importance of receipts. Receipts are the best thing to prove a transaction. If you lose your receipts, applying for tax reduction will be impossible. They are also important in filing taxes, applying for loans, and even when facing audits.
So make sure to keep all receipts that you receive. You can manage a filing system, use dedicated software, or at least take pictures to ensure the safety of the important receipts.
Hire a bookkeeping service in London
If you are looking for the best way to avoid making any mistakes when managing books, hire a reliable bookkeeping service in London. An accounting service with expert accountants will remove any mistakes from your financial records. They are fully capable of handling your books, taxes, and payroll with no errors if the need arises. Advice for ways to improve on the current state of the business is also an additional advantage of having an accounting service by your side.
If you can make any of these mistakes, make sure to correct them immediately. If you need help from a professional to have a deep look into your bookkeeping process to put together a plan to help you correct the process, we are ready to help. Get in touch.