Starting a business is a wonderful thing to accomplish, but it is also extremely risky. When you first start out on your own, there's a lot to worry about, and it's tempting to put accounting on the back burner, but it would be a tremendous mistake. Accounting is critical to your company's financial health, and mistakes may be costly, especially in the early stages. It's critical to understand which errors to avoid in order to keep your small business afloat for years to come.
TOP 4 Mistake:
Accounting is difficult, which is why it takes accountants years to become completely qualified. Attempting to handle your accounts on your own is a certain way to waste time and cause stress. Besides, it's unlikely that you'll be able to save a considerable amount of money on your tax return unless you have extensive financial understanding.
Furthermore, you'll be heavily penalized if you make even a minor error on your return, which could put your company in financial jeopardy.
Attempting to manage on your own cuts down your resources, therefore it would be better if you can look for professional assistance sooner. Investing in the services of a knowledgeable and chartered accountant is one of the great decisions that you can take for the sake of the financial health status of your own business.
TOP 3 Mistake:
Using Outdated Methods
In a modern world today, your accounting methods should reflect that you're a twenty-first-century company.
Forget the ledgers and Excel spreadsheets because they are slower, and less efficient than online accounting and bookkeeping software that you can get and more effectively use these days.
Modern accounting software today is more simple and easier to learn and can also automate all the calculations and other processes, which lowers the possibility of any mistakes, especially on your tax return, and lowers the chances of making poor financial decisions owing to erroneous information.
You won't have to spend hours updating and organising your financial data for using this type of program. Another advantage is that you may quickly and easily identify and cross-reference information without having to spend hours looking for the relevant files. It may be more expensive than doing it yourself at first, but using online tools can save you a lot of time.
TOP 2 Mistake:
Confusing Cash Flow and Income
Not all of the money that you acquire means it’s the sum of the money that you make.
Although £100,000 in income seems impressive, but if you spent the £30,000 on equipment, insurance, and workers, you're left with a £70,000 profit.
You'll then have to pay tax on your gross profit, resulting in a reduced net amount.
It's critical to understand not just how much money comes into your company, but also how much money leaves it.
New business owners frequently make the mistake of getting carried away with gross numbers, which rapidly gets them into trouble. It's critical to be anchored in reality and know how much money you're making in order to avoid overspending.
TOP 1 Mistake:
New business owners are frequently overwhelmed, and they frequently disregard bookkeeping.
It is, however, important that you keep your records up to date and track all of your income and expenses.
Without this information, you won't have a comprehensive view of your financial situation, which can lead to plenty of problems.
Accurate bookkeeping enables you to discover trends, evaluate your spending, and determine which procedures deliver the highest return on investment. You may then use this information to improve your company's financial health, increase earnings, and manage cash flow. Staying on top of your records allows you to stay one step ahead of the game and prevent disasters from starting.
It's useful to prevent the previous accounting missteps if you want your company to succeed. It's recommended not to take any chances when it comes to neglecting or mismanaging your accounts.
While it may be easy to put accounting off until later, you must make it a top priority right away. It's impossible to have a good business with a lousy accounting system.
If you need help with everything you need to know to legally set up as a bookkeeper, there’s a short programme for people who want to become bookkeepers and gain that exclusive work/life balance.
Rebecca Wallace has been helping individuals and businesses with their bookkeeping and accounts. More and more often she’s being asked how to become a bookkeeper so she put this course together to get you started on your journey.
Well, now you can!
Become A Balanced Bookkeeper!
Over the course of five days, through video, worksheets and images, you will learn in a no-nonsense way:
Say NO to long, boring and complicated guides that don’t really give you any information!
Say NO to wasting hours of your time trying things and making mistakes!
Say NO to signing up for courses only to find they were not what you thought.