By now you should already know that business finances are one of the most important aspects of your company. If there are any mistakes or oversights in your accounts and bookkeeping, you will find that most of your business is based on bad numbers. In some really extreme cases, you might even find that this could look to an outsider like you have cooked the books. That could have some very serious consequences!
You’ve been filing late
One of the most common reasons why some company’s books and accounts are slightly off is because they have missed some filing deadlines. There are very strict deadlines when it comes to filing taxes and other important documents and information for your accounts. If you fall behind, your bookkeeping will suffer as a result, and you might end up being fined by the taxman. This is one of the reasons why it’s important to bring an accountant on board to your team. They will know all of the various deadlines that need to be met, and can help you keep on top of all your accounting and bookkeeping to ensure that it is always in ship shape.
It’s always important that you remember to keep a check of all your business finances that you accumulate. Even if these are small things like buying a Starbucks coffee on your way to a meeting or train tickets to visit a client. It doesn’t matter that you consider these to be very small expenses – if you are using your company money to buy them, there needs to be a record of them. It’s important that you can show where the outgoing money of your business bank account is going to for tax purposes. If you aren’t able to show records or receipts for some money, you could end up in hot water. Remember that any employee or manager who spends company money for business related expenses needs to be able to give you a receipt or invoice as proof of payment for your company’s records.
No information with receipts
Simply keeping receipts for all of your business purchases isn’t enough. You will also need to have plenty of information with them so that you can backup each payment with a reason for why it was necessary. For instance, if you do grab a coffee on a way to a meeting, you need to be able to say who the meeting was with and what its purpose was. If you don’t have enough information such as this to back up your payments and expenses, then you might not be able to file them for your taxes. If there are any holes in information, it’s a good idea to speak to your accountant about this and how you can solve it.
Failing to separate business and personal expenses
When you do have a business account it is very important that it isn’t used for any personal expenditure. Similarly, you should try and refrain from using your personal money for your business’s needs. If you do start to mix these up, then your two sets of finances could become intertwined which can become very complicated. Plus, it might make it even more difficult for your accountant to figure out your taxes and business accounts. It will also increase the risk of you getting audited, which can prove to be very stressful indeed.
Mistakes with your inventory
Are you regularly checking and updating your inventory records? If not, this is something that you need to improve on straight away. Firstly, you need to make sure that you are taking inventory checks on a regular basis so that you don’t fall behind with orders or waste money on ordering incorrect items. It’s also important that you are carrying out the stock checks correctly so that nothing gets missed or doubled up. Again, this is something that could cause problems with your orders and finances at a later date.
Sending out invoices late
If you don’t send out invoices, then there is no way your clients will know that they have to pay you and how much they should pay you. You can’t send out invoices until you have completed the services they ordered or they have purchased your items. However, that doesn’t mean that you should wait too long to send out your invoices as this can cause significant cash flow problems. That’s because you will need to give your clients and customers the regular thirty-day payment terms on your invoices. So, they don’t have to pay until thirty days after they receive the invoice. So, as you can tell, it’s better to send out your invoices as soon as you can so that you don’t have to wait too long for their cash!
If you make regular mistakes in your employees’ payroll, you will find that this can have a big knock-on effect in other areas of your business. For instance, it can affect your staff’s morale, will lead to mistakes being made in employees’ pension and tax payments, and could also affect your company’s tax records. Some business owners prefer to carry out their company’s payroll on their own, and it is very possible to do this. So, you might prefer to outsource this task to a HR professional. This specialist will be able to set up a payroll system for you and coordinate with your accountant so that there are no mistakes when it comes to paying your employees and sorting out their tax and pension payments.
As you can see, there are a few different ways that bad maths and poor business practices that can really mess up your business’s numbers. However, if you are careful there are numerous ways you can escape the pitfalls that come with bad bookkeeping. You just need to follow the tips in this blog post!