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Archives for February 2017

Don’t make the most common bookkeeping mistakes!

Bookkeeping might not be your favourite job – but it’s so important to the smooth running of your business.

Here’s my list of the most common mistakes that I see small business owners make time and time again.  Forewarned is forearmed so take a look at your current system, and see if you need to make any changes!


Not making a distinction between business and personal items

It’s tempting and very common just to use your personal bank account and credit card for your business transactions.  Its may seem less hassle when you start, but it makes your bookkeeping so much harder to keep track of over time.

You need to be able to claim for your business expenses, but not for your personal expenditure.  Keep things clean and simple from the start – have a separate bank account that you just use for business income and expenses – and you will avoid muddle and potential trouble with the tax man later on.


Not keeping all your receipts

You will probably keep receipts for large items of expenditure, or for items where you have a supplier invoice, but all those small items often get forgotten.  If you need to justify your expenses to HMRC, they will want to see the evidence with the receipt.  If you don’t keep the receipt, you’ll probably forget to record sundry items like parking, stationery and stamps, and then you will end up paying the tax man more than you actually need to!


Not having an organised system

Whatever works for you, but not keeping on top of it will mean it becomes a mammoth task to catch up, and you will put it off more and more!  A simple system is fine, but you need to keep basic records and file things away sensibly. Cloud systems and receipt scanning Apps save you time and stress, and make it more likely that you record all you receipts when you get them.


Recording Money spent on petrol/car insurance/repairs – and claiming a mileage allowance

It’s a nice try – but you can’t have both.  Keep a mileage record of business mileage travelled (excluding regular commuting) and then pay for your petrol personally – or record the total running costs of your car in the year, and allocate a percentage to the business based on business usage.  I have had clients who pay their car insurance and repairs from the business – and then want to claim the mileage allowance of 45p per mile.


Not Leaving Money in the Business for tax

Hopefully you have made a profit – and that may well mean you owe the tax man.  Not taking into this account, and spending all your hard earned cash will lead to tears later down the line when you have to pay the tax bill in January.  Again cloud accounting systems will estimate for you what your tax bill might be – which at least flags up to you the fact that there will be tax to pay.  Saving the money to pay it though is still down to you!


For more information or help with your accounts please contact Rosie Forsyth

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How To Keep on Top of your Books?

I find it amazing………… but not everyone’s idea of fun is keeping their accounts up to date.

If you are one of these strange creatures, then what do you need to do each month to keep on top of your bookkeeping?

Using Apps and cloud based packages is the way forward (and may soon become compulsory under Making Tax Digital) but even if you currently use a spreadsheet; each month you should do a few simple tasks:

  1. Raise sales invoices for work done in the month and send them out
  2. Make sure you have been paid for previous sales invoices.  Mark them off as paid on your spreadsheet, or chase any slow payers
  3. Collate all your expenses for the month – these may have been paid from your business account, cash or on a credit card, but if they relate to the business make sure they are recorded.  List them on a spreadsheet and file the paper receipts in a file by month.  (A cross- referenced numbering system too would make your accountant very happy at the end of the year!)
  4. Ideally you should “reconcile” the bank.  If you have a bank account that you just use for business, go down it and make sure you have recorded all the transactions on there on your spreadsheets.  You will need to add to your spreadsheet things like direct debits and bank charges as you won’t have paper receipts for those.  Your spreadsheet will then include everything that is on the bank statement for the month, plus expenses you have paid for in cash or on a credit card.
  5. Update your mileage log.  If you use your car for work you need to keep a record of the miles you have done.  Leave this task til the end of the year and you’ll have no idea where you have been!
  6. If you are putting money aside for your tax bill, transfer this over to a different account (and forget about it!)


And that’s it!

Doing this once a month will help you keep you on top of your accounts.  Using an App such as “Receiptbank” or “1tap” means you can scan your receipt when you get it and then throw it away.  The App will record the data for you and store the photo of the receipt – giving you your Sunday afternoons back to do something more exciting!

For more information or help with setting up a bookkeeping system, please contact Rosie Forsyth.

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Making Tax Digital – an Update

HMRC has published its response to the MTD consultations and gives us an update on the current position as to how MTD will be implemented next year.

So what do you need to know?

  • The way you report to HMRC will change from April 18
  • You will need to give HMRC info quarterly with a 5th report due at the year end
  • You can still use spreadsheets as long as they meet the requirements of MTD ( this is likely to mean linking it with software somehow)
  • The requirement to keep digital records does not mean that you will have to produce and store your invoices and receipts digitally
  • Free software will be available to businesses with the most straight forward affairs (no info yet about what this will look like)
  • Cash accounting rules can be used for businesses with a turnover up to £150,000.
  • Businesses eligible for 3 line accounts on their tax return will only have to give the same info quarterly (income, expenses, profit)
  • No penalties for the first 12 months for getting it wrong!

So for a small sole trader business, from April 18 you will have to do the following returns:

  1. First report from April – June 18 due in June/July 18
  2. Second report from July – Sept 18 due in Sept/Oct 18
  3. Third report from Oct – Dec 18 due in Dec 18/Jan 19
  4. Fourth report from Jan – March 19 due in March/April 19
  5. Fifth and final report for the year, confirming annual figures due Jan 20
  6. Normal tax return for 17/18 due 31 Jan 19

HMRC has been lobbied to change the level at which business need to comply with MTD (currently sales of £10,000 for small businesses and landlords) but they have not announced any changes yet.  Instead it is “considering if further” along with the start date for the smallest of businesses!!


It is also playing down the costs of MTD to the small business.  Its own assessment is a one off transitional cost of around £280 – much lower than the figure estimated by everyone else of around £1250.  (I know which figure I believe!)


So What Should I do Now?


With the new financial year starting in April – now is the ideal time to think about your bookkeeping systems and how you are going to need to change them for MTD.  MTD is a year off, but with the first return due just 3 months into the year, that’s not long to get your head around a new system.


It is likely that any new free software offered will be similar to the current HMRC online tax return filing system (eg can’t be accessed by your accountant), so if you are going to need/want your accountant’s help with MTD, then you will probably need to look at commercial online software.


New programmes will undoubtedly become available during the year as we learn more about MTD, but for those who leave their accounts til the year end and then spend a day frantically getting a spreadsheet up to date, or organising receipts, you are going to have to change your ways.


Online bookkeeping systems do save you time and hassle, as well as giving you real time information about your business, and are well worth the £20-£30 a month cost.  My advice would be to look at these for your business from April this year so you are all ready to go when MTD goes live.


For more information please contact Rosie Forsyth

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