It is easy to make mistakes when managing your company’s accounts, because this can be complicated if you are not a professional. Here are three that small business owners often make:
1. Neglecting account reconciliation
Reconciling your business accounts means making sure there are no differences between real and recorded transactions, for example between your books and your bank statements. It is essential to keeping accurate accounts, but this is frequently neglected by busy business owners and is one reason why bringing in a small business accountant in South Yorkshire (or whatever your location is) can make sense.
2. Not including out-of-pocket expenses
People running their own small firms sometimes opt to pay minor business costs using their own cash, and that is fine as long as it is recorded in your company accounts. Failing to do that can lead to two problems: firstly you will end up with incorrect financial records, which can lead to problems with HMRC, and secondly it can create a false impression of the financial health of your business.
3. Confusing cash flow with profit
It is common for small business owners to mix up cash flow and profit, believing that landing a lucrative contract means the money is there to use right away. In fact, the cash from this can take weeks or even months to flow in and should only be accounted for when it does.
Here at Adaptive Accountancy, we have been advising small firms since 2011 and can help with any cash flow queries you have.