Common bookkeeping mistakes to avoid

Bookkeeping plays a pivotal role in ensuring long-term business success. By having complete and up to date records, businesses have a clear picture of their financial health. Accurate bookkeeping is essential for informed decision-making, regulatory compliance, and effective planning. 

Robust bookkeeping practices help you keep track of income and expenses, as well as prepare for your year-end accounts. Investing in good bookkeeping practices or outsourcing to an experienced professional will benefit your business. 

To keep your books in order and avoid unnecessary stress, it is essential you prevent common bookkeeping mistakes. 

Not recording transactions promptly 

Keeping on top of bookkeeping can be difficult unless you set time aside. We understand that bookkeeping will not be your priority while running your business. However, late recording of transactions and not reconciling accounts can lead to a larger workload when you come to deal with it again. Not knowing how much money you have can also lead to cash flow problems. 

Having up to date records means you are working with up-to-date information and making decisions at the right time. 

Losing track of receipts 

When you are given a paper receipt it is easy to take it and put it down somewhere ready for it to be lost. Keeping receipts in one place will help you keep track of them all. For example, put them in the glove box in your van, or as soon as you are back home or in the office file them away properly.  

Having a digitised records system, such as QuickBooks or Dext, with scanned receipts, means you do not have to worry about losing paper receipts. 

Incorrect categorisation of expenses 

When you look at your expenses, it helps to sort them into categories. This way, you can see if they are repair costs or telephone costs. This will help you understand where your money is going.  

If you are looking to reduce your costs, having reports that show you exactly what you are spending will help you make better decisions. If you label everything as administrative or sundry expenses, you cannot make proactive changes. 

Read all you need to know about bookkeeping in our guide to bookkeeping for a sole trader. 

Not separating personal and business expenses 

When claiming expenses, it is important they are valid business expenses. Including personal expenses can distort your financial results. This means you cannot trust the numbers you see. 

When you prepare your accounts and tax return, mixing personal and business accounts makes more work for you and your accountant. 

A business bank account helps you keep personal, and business expenses apart. It also ensures your records are correct. 

Failing to back up financial data 

Keeping your records secure and safe is essential. HM Revenue & Customs (HMRC) require businesses to keep your records for at least five years after the 31st January submission deadline. 

Holding paper bookkeeping records means you are at risk of losing them or damaging them. If you have digital records back them up regularly. This way, you can access them if something happens to the original. 

Using cloud bookkeeping packages means you do not need to back up your data. The software provider does that for you. Your records are safe and secure. 

Tips for Better Bookkeeping 

Implement cloud bookkeeping tools 

Cloud bookkeeping can offer many advantages, including: 

• automatic back ups 
• able to enter data straight from bank statements 
• create rules to automatically categorise transactions correctly 
• Making Tax Digital (MTD) compliant software 

Create a routine for data entry 

Making bookkeeping part of your routine will help you keep on top of it. Regular bookkeeping, done daily or weekly, helps you stay on top of things. It gives you up-to-date information to refer to. 

If you get behind with your bookkeeping it can be hard to motivate yourself to get back on track. Setting a diary reminder for a time when you will not be disturbed will help you stay in control of your books. 

Work with a professional TaxAssist bookkeeper 

Bookkeepers are trained and experienced to provide a professional bookkeeping service to you. Bookkeeping is a convenient part of your business that you can outsource. 

Looking for a local bookkeeper need not be hard. At TaxAssist Accountants Luton North West we can help you manage your books and meet your tax obligations. Find out more about how to find the right bookkeeper in our guide. 

How TaxAssist Accountants can help 

Our bookkeeping service will give you more time to manage your business and minimise bookkeeping errors. Call our team on 01582 945 622 today or use our online contact form. 

Last updated 6 Jan 2025 | First published 6 Jan 2025

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This 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.

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