Running a small business is an exciting journey, but it also comes with plenty of challenges, especially when it comes to managing your finances. Accounting mistakes don’t just cause headaches; they can cost you time, money, and even your peace of mind.
Here are 7 of the most common mistakes small business owners make and some simple ways to avoid them.
1. Mixing Business and Personal Finances
One of the most common errors is using the same bank account or credit card for both personal and business spending. It might seem convenient at first, but it quickly leads to messy records, inaccurate reporting, and problems at tax time.
The best solution is to open a dedicated business bank account and keep everything separate. Clean records make it much easier to manage cash flow and stay compliant with HMRC.
2. Not Keeping Receipts or Records
Small purchases add up, but without proper receipts, you could be missing out on valuable tax deductions. Worse still, if HMRC ever audits you, incomplete records can cause unnecessary stress.
Digital tools make this easy. Apps like Dext or Hubdoc, or even Xero itself (we suggest this to our smaller clients to keep their costs down) allow you to snap a photo of your receipts and store them instantly, keeping your records tidy and secure. Cloud-based accounting systems can even automate much of the process.
3. Trying to Do It All Yourself
Many business owners wear too many hats, and an accountant shouldn’t have to be one of them. While handling everything yourself might save money in the short term, it often leads to errors, missed deadlines, and unnecessary stress.
Even if you’re not ready to hire a full-time accountant, consider getting regular advice or support. A professional can help you avoid costly mistakes and free up your time to focus on running and growing your business.
4. Forgetting to Reconcile Accounts
Reconciling means checking that your accounts match your bank statements. Skipping this step might not seem like a big deal, but it can allow errors, duplicate transactions, or even fraud to go unnoticed.
Reconciling monthly is a good habit, and most modern accounting software makes this process quick and straightforward.
5. Missing Tax Deadlines
Late filing of VAT, PAYE, or year-end tax returns can lead to fines, penalties, and added cash flow pressure. It’s one of the most avoidable mistakes but also one of the most common.
The simplest fix is to plan ahead. Use calendar reminders to stay on top of deadlines, or better yet, let your accountant handle submissions for you so there’s one less thing on your plate.
6. Not Budgeting for Tax
It’s easy to get caught up in profits and forget about setting money aside for HMRC. Unfortunately, many small businesses end up scrambling for funds when tax bills arrive.
A simple way to avoid this is to create a “tax pot” account and set aside a percentage of every sale, usually around 20%–25%. That way, you’re never caught off guard when tax season comes around.
7. Ignoring Financial Reports
Profit and loss statements, cash flow reports, and balance sheets aren’t just paperwork, they’re tools that give you a clear picture of how your business is performing. Ignoring them means flying blind.
Make it a habit to review your reports monthly. If you’re not sure how to interpret them, your accountant can walk you through the numbers and help you use them to make smarter decisions.
Final Thoughts
Accounting mistakes are easy to make, but with the right systems, habits, and support, they’re just as easy to avoid. Keeping finances organised, planning for tax, and using your reports effectively can make all the difference in the growth and stability of your business.
At Greystone Advisory, we help small business owners stay on top of their accounts, without jargon, confusion, or stress. Whether you want us to review your systems, manage your compliance, or just give you peace of mind, we’re here to help.
Get in touch today to see how we can support your business journey.
