At Elevation Financial, we know all too well that running a business comes with many financial responsibilities, especially when it comes to accounting and taxes. Through experience, we have identified these seven accounting tips and the mistakes you should be careful to avoid:
1. Mixing Personal and Business Finances
One of the most common and problematic mistakes is blurring the lines between personal and business finances. Don’t mistake your business bank account for your personal funding. This can lead to inaccurate records and tax reporting issues. It is vital to maintain separate bank accounts and credit cards for your business and personal use. Keeping these finances segregated will simplify bookkeeping, improve tax reporting accuracy, and provide a clear picture of your business’s financial health.
2. Neglecting Regular Bookkeeping (Beans must be counted and allocated)
We all get busy ensuring there are beans to count, however, failing to keep up-to-date and organised financial records is a common mistake. Failure in this area can result in inaccurate reporting, missed payments, and blown deadlines. Make it a habit to record all financial transactions, including sales, expenses, and cash flow. Don’t worry – user friendly accounting software can help streamline this process and keep you on track. You focus on your business, and we’ll make sure the admin is all in order.
3. Missing Tax Deadlines
“In this world, nothing can be certain, except death and taxes” – Benjamin Franklin.
Procrastination and missing important tax deadlines can result in hefty penalties from HMRC. Stay on top of monthly (PAYE), quarterly (VAT), and annual filing deadlines. Set up reminders well in advance and consider working with a tax professional to ensure timely compliance. Part of our service to our clients is ensuring they are reminded regularly about up and coming deadlines.
4. Failing to Register for VAT on Time
The business is gaining traction, and the revenue line is climbing but many entrepreneurs overlook registering for VAT when their turnover reaches the threshold. This can lead to backdated VAT payments and potential fines. Monitor your turnover and register promptly when you approach the VAT threshold.
5. Not Claiming Eligible Tax Deductions
At Elevation Financial, and a personal favourite of mine is uncovering unclaimed eligible tax deductions for our clients. Overlooking legitimate tax deductions means paying more tax than necessary. Familiarise yourself with allowable business expenses and keep meticulous records. Common deductions include office supplies, travel expenses, and certain vehicle costs. Consider consulting with an accountant to maximise your eligible deductions.
6. Poor Record-Keeping for Expenses
Often you, the entrepreneur, are so busy producing the beans, you forget to claim the costs of the beanstalk. Failing to keep proper documentation for business expenses can lead to denied deductions and tax issues. Maintain organised records of all receipts and invoices. Consider using expense tracking apps or software to simplify this process.
7. DIY Approach to Complex Tax Matters
While it’s tempting to handle everything yourself, complex tax matters often require professional expertise. Trying to navigate intricate tax laws without proper knowledge can lead to costly mistakes. For tasks like tax planning, VAT returns, exit strategies and year-end accounts, consider engaging a qualified accountant. Elevation Financial are able to support businesses over a certain size with a fractional CFO ensuring close attention is being paid to all these areas on an ongoing basis.
By avoiding these common mistakes, you can maintain better financial health, ensure tax compliance, and focus more energy on growing and scaling your business. Remember, when in doubt, seeking professional advice from a qualified accountant or tax specialist, is more often than not, a wise investment.
Free Consultation
At Elevation Financial we are always available to have an initial conversation or consultation about how we can help, likewise if you have a difficult situation and need a quick second opinion, we’re happy to help where we can.
Contact us today for a free consultation on how to improve your business’s financial health.
United Kingdom and South African Advice
The above article has been written in a UK context. These same seven mistakes can be applied to South African based businesses as well. We offer both accounting and tax advice in the UK and South Africa, our team are fully qualified in both jurisdictions.
Do you need some business advice?
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