Top 5 Bookkeeping Mistakes to Avoid
Accurate bookkeeping is hugely important for SMEs. Here are the biggest mistakes to avoid with your bookkeeping
Accurate Bookkeeping is so important
Good bookkeeping provides you with up-to-date management information on how your business is performing. From telling you what margin/profit you are making to providing you with warning signs that certain costs are getting out of control, solid bookkeeping is one of the strongest weapons in the armoury of a small business.
If you are a small business owner looking after your own books, make sure you avoid these 5 traps:
1. Incorrect Treatment of VAT
Your weekly/monthly bookkeeping will form the backbone of the VAT returns that you submit to the Revenue Commissioners. VAT legislation is constantly changing and trying to keep abreast of all the developments can be time consuming and confusing.
You have to ensure that you treat each invoice in line with the latest VAT rules in order to avoid the dreaded Revenue audit letter arriving on your doorstep.
Many people make simple errors which can result in sizable settlements being made with Revenue. Common mistakes include reclaiming VAT on expenses not related to the business, not entering credit notes correctly and reclaiming foreign VAT on imported goods and services.
2. Not performing a Bank Reconciliation each month
One of the fundamental aspects of bookkeeping is reconciling the books and bank statements every month. However, this process is often ignored due to a lack of knowledge or a lack of time.
The initial years of a new business are extremely overwhelming but failing to keep your books current means you run the risk of missing some major warning signs about the financial health of your business. You could miss potential cash flow issues or a significant rise in supplier costs which would affect the profitability of your products.
3. Not entering small receipts or forgetting to track expenses
Often times we can pick up small incidentals for the business as we go about our day-to-day operations. It might be supplies for the canteen or a box of paper for the printer in the office.
These transactions can seem immaterial at the time and often the receipt is mislaid or can be thrown into a glove compartment or box in a van. These small receipts when added together, however, can make up a significant sum of money when added up over an entire year. Failure to keep these receipts and input them into your monthly bookkeeping process will mean that when your accountant goes to produce your end of year accounts, and likewise your end of year tax return, your profits will be higher on paper than they are in reality resulting in a higher tax bill. Even €1,000 in mislaid expenses could result in your income tax bill being up to €495 bigger. Add in the fact that your VAT bills will be higher as well and you could be giving significantly more to the tax man than you need to.
Small business owners can often pay for supplies out of their own pockets during the course of the financial year. All of these monies are owed back from the business to the owner and it is vital to keep track of this. This is especially important in the case of limited companies where the monies can be reimbursed to the business owner tax free.
4. Giving employees too much access
While it is a good idea to delegate your bookkeeping to an experienced person within the business, it isn’t necessarily a good idea to give them open access to business records without a system of checks and balances in place.
5. Lack of Communication
Having someone handling bookkeeping is only effective if they are filled in and kept up to date on all financial transactions.
It is vital that your bookkeeper is made aware of any transactions that would affect the monthly reporting e.g. paying a bonus to staff, paying a supplier out of personal funds, collecting cash from customers and using it to pay for supplies.
Your bookkeeping system is only as strong as the information you feed it so take the time to ensure that you are tracking all activity in your business.
We can help
Many small businesses outsource their bookkeeping to ensure they don’t fall into any of these traps. It also gives business owners some time back so they can concentrate on growing their business.
TaxAssist Accountants provides bookkeeping services for SMEs all across the country. We can offer our clients incredibly easy to use accounting software, designed to keep you in control of your figures wherever you are, 24/7.
Contact us today to book your free initial consultation and see how we can help.
Book your FREE Initial Consultation
Date published 14 Jul 2022 | Last updated 14 Jul 2022This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
Choose the right accounting firm for you
Running your own business can be challenging so why not let TaxAssist Accountants manage your tax, accounting, bookkeeping and payroll needs? If you are not receiving the service you deserve from your accountant, then perhaps it’s time to make the switch?
Local business focus
We specialise in supporting independent businesses and work with over 6,246 clients. Each TaxAssist Accountant runs their own business, and are passionate about supporting you.
Come and meet us
We enjoy talking to business owners and self-employed professionals who are looking to get the most out of their accountant. You can visit us at any of our 23 locations, meet with us online through video call software, or talk to us by telephone.
Switching is simple
Changing accountants is easier than you might think. There are no tax implications and you can switch at any time in the year and our team will guide you through the process for a smooth transition.
See how TaxAssist Accountants can help you with a free, no obligation consultation