Statistics show that businesses that keep good accounting records are less likely to fail.
HMRC have some excellent advice on how records should be kept
So here are my top 5 mistakes that small businesses make:
1. Not doing any accounts – the shoe box approach to business
This is the most common mistake, book keeping is best done as you go along, putting all the paperwork in a shoe box or carrier bag is a really bad idea as you have no idea how your business is performing.
2. Not keeping receipts
Often small business miss out on claiming all their expenses because they fail to keep receipts and lose track of their spending
3. Not reconciling
Reconciling your bank statements to your cash book is vital to make sure that all of your income and expenses have been recorded in your accounts.
4. Using the wrong accounting system
For some businesses a manual cash book and records are fine but for many accounting software will be needed to keep track of debtors, creditors and VAT. Make sure you understand your accounting system and operate it correctly.
5. Mixing business and personal expenses
Some sole traders even mix up business and personal bank accounts and in extreme cases don’t even have a business bank account. This can cause errors and often means that a sole trader will either claim to many expenses or to few.
Improve your chances of business success, avoid the common mistakes listed above.