Starting a business can be a dream come true and very exciting! There are however, many areas you will suddenly need to be involved in which may not be your core area of interest or expertise. Knowing when to delegate and outsource could save your business and your sanity.
Here are the most common mistakes we find in new start ups/small businesses – avoid these and you will have a better chance of survival and success!
1. BOOK KEEPING!
Letting the paperwork pile up and not having a system to record these whether it be a book or one of the many online accounting software products now available means you are running blind.
Be honest with yourself – if this is not your thing then delegate – a good book keeper is not a cost – they are an investment and using one will reduce your accountancy bill and relieve you of the anxiety and dread in getting this task done!
Most online accounting software products come with bank feeds so it really can be easy to make sure you have everything up to date whether you want this weekly/monthly or quarterly.
AND, remember, if you don’t know how the business is doing financially, you will have no indication or idea of what tax is due!
2. NOT KEEPING RECEIPTS
You may be paying too much tax because you do not have all your receipts! Have a separate bank account for your business and try to pay for everything through this. At least that way, if you lose the receipt, you have evidence of the cost.
Avoid cash transactions as far as possible – if you lose a receipt where you paid cash, then it is unlikely that your accountant and HMRC will accept this as a business cost.
3. NOT RECONCILING YOUR BANK
The first step any book keeper or accountant will do is to reconcile the business bank accounts. This means they will check that all the income less expenses plus your opening balance agrees to your bank statements. It is a very easy way to validate that all transactions have been recorded.
In our experience, many clients who keep records on excel fail to undertake this exercise. Where the bank is not reconciled , additional work will be required by the accountant to find where the duplication/error/omission has occurred – this takes time and therefore costs.
Having business bank accounts for all your business transactions and using online accounting software with bank feeds overcomes this problem.
4. USING THE WRONG BOOK KEEPING SYSTEM
First of all use one but use one that works for you ! We find that most of our clients would prefer to be developing and growing their business rather than becoming book keepers!
Avoid excel templates if you can which merely record data and don’t give you information on how the business is doing. Excel sheets can become corrupted and deleted – a big problem if HMRC want to undertake say a VAT audit and you don’t have the data!
We work with a number of online packages that start from just £5 plus VAT per month so it doesn’t need to be expensive to go online!
5. DUALITY OF COSTS
HMRC will allow costs to be claimed and offset to reduce the tax bill where they are incurred “wholly, exclusively and necessarily” for the business.
For sole traders, you are able to claim a percentage of costs of say travel, mobile phone bills etc that relate to the business but you should ensure you have proper records of how these percentages have been derived rather than a finger in the air exercise.
For limited companies, the issue is more important. Mobile phone contracts must be in the name of the limited company, food and drink can only be claimed if incurred away from home say on a conference or training course and only entertainment of staff will be allowable.
For limited company directors, any expenditure which is even slightly personal will be disallowed in calculating the end tax bill so it is best to be completely clear and precise. If in doubt, ask us and we can advise.
6. FAILING CHEAPLY
Think about how much you charge for your services and then think about how much time you could spend trying to incorporate your own company, doing your own tax returns and accounts.
It is fairly easy to set up your own company online but in our experience, little thought goes into how the company is set up, who will be directors and who will be shareholders and how these shares will be held. These can be costly mistakes in terms of managing your affairs tax efficiently.
We offer a free initial consultation and incorporation service for all our clients so you have peace of mind that you have set everything up correctly from the start.
Filing of accounts may seem very easy and straight forward with Company House but the filing of the tax returns and accounts to HMRC require electronic tagging known as iXBRL. Failure to submit in this format will mean rejection of the tax return and penalties of £100 per document rising to £300 after 3 months if the filing deadline is missed.
Appointing us as your accountants mean you have access to ongoing support and advice . This is not chargeable – this is available as part of our fees to all our clients.
There are many filing deadlines for payroll, VAT, accounts and tax just to name but a few if you set up a limited company. We manage these on your behalf. No filing and continual late filing will raise your risk profile with HMRC and can cost you a lot of money in penalties which could be better spent growing the business so give yourself peace of mind and engage an accountant as soon as possible in your business journey.
Contact us to get us on board and support your business.