Mistakes Small Business Owners Make on Business Expenses

Posted 10 Sep 15

Staying on top of your business expenses can be difficult and tricky at times.

However, with our guide you will be able to avoid the most common mistakes small business owners make when dealing with their business’ accounting.

Running a business requires constant investments: starting with creating a high quality product or service, through marketing it to a target group of clients, and ending up with paying the income to all of the people involved in it.

As a company owner you will be responsible for tracking and managing expenses throughout the year and ensuring that all your records and receipts are ready for the annual tax return.

1. Not Being Aware of all Expenses

It is easy to confuse your personal and business expenses, especially if you are a small business owner. A lot of people use money from their personal pockets on assets which can be deducted from their taxes without even realising it.

Did you know, for example, that the hosting fees you paid for your business website can be claimed during your tax return? If you’re working from home, your situation will be worth taking an even closer look into. You can save a lot of money on your water and electricity bills and in some cases, even council tax.

If you want to make sure you do not overpay your taxes, contact our experts at Tawanda Accountants and we will make sure you make the most out of your financial situation.

2. Claiming Non-Deductible Expenses

One of the most common mistakes small business owners make is claiming expenses that cannot be deducted. The simplest way to think about what can be claimed is by choosing the expenses that are both ‘ordinary and necessary’ to run your business.

It can mean different things for different companies, but it’s important that each expense you intend to claim can objectively fit with this description. Claiming non-deductible expenses can result in high tax penalties.

3. Failing to Record Cash Expenses

Whenever you use your bank card to pay to cover your business expenses, most probably, the details of the transaction will be recorded on your bank account. It makes the expense easy to record and remember.

However, the situation is different whenever you pay for the purchase you are making with cash. If you withdraw money from your business bank account, remember to record it in your accounting folder, along with the further details of the purchase which can help you remember it in the future.

4. Not Keeping Receipts

Receipts can differ in the size and the quality of paper they’re printed on, which can make them easy to lose. Make sure that you always keep the receipts for your business expenses, because if HMRC decides to investigate your company’s tax returns, they will be the only proof you have to claim them.

If you purchase items online, remember to save the confirmation email and the purchase receipt on your computer. We recommend you take pictures of your paper receipts and keep an electronic versions of them to make sure they can be eligible to read.

About Us

As a leading UK accounting firm and expert business consultancy, Tawanda Accountants carry out scrupulous accounting and provide payroll services and procedures for small businesses, individuals and business start ups.