If so, you may be tempted to just leave them alone, and hope that they just quietly disappear. But beware! This may be a dangerous move for your business, as some of these ghosts could come back to haunt you later in the shape of wasted time or, even worse, an increased tax bill.
Emily Coltman FCA, Chief Accountant to FreeAgent – which provides a multi award-winning online accounting system specifically designed for small businesses and freelancers – gives her top tips to exorcise the ghosts already in your books and prevent them from returning!
Cast out any errors in contact balances
Do you have any customer or supplier accounts showing a balance due, when there really isn’t? This can often happen if a customer overpays you by a couple of pounds, or if you end up paying a supplier less than they charged you.
You’ll only be able to remember the reasons for these mismatches for so long, after which it’ll be much harder to put them right. Later on, you could find yourself having to pay extra, or to keep manually altering your customer statements so as not to show the mistake.
How to exorcise this ghost:
Correct your accounts with credit notes, or additional invoices, and tie up the payment differences to these credit notes and invoices.
And if you ever get another payment mismatch, remember to correct it in your books straight away to stop that ghost coming back!
Put unexplained transactions to rest
When you don’t know how to categorise a transaction in your account, you may leave it unexplained, thinking “I’ll come back to them later”. The problem is, if you leave it too long, you may have forgotten what they were, and in the meantime, your books can’t give you a true picture of what you’ve earned and spent.
How to exorcise this ghost:
Set aside some time to go through your paperwork, your email inbox and anywhere else where you might have information about what these transactions are. Explain all of them – then banish the ghost for the future by explaining all your new transactions straight away – it’s worth the extra hassle!
If you’re not sure where to put a particular transaction in your accounts, check with your accountant.
Dig up forgotten VAT queries
When you’re explaining transactions, you may not be sure of whether it has VAT on it to reclaim, or whether you can reclaim the VAT you can see on the receipt. If you reclaim the wrong amount of VAT, then you risk paying too little money to HMRC, which can result in you being charged interest and penalties.
How to exorcise this ghost:
If you have a few of these transactions, ask your accountant to spend some time with you going through your queried items and making sure you have reclaimed the right amount of VAT on each one.
Protect your business from this spectre in future by checking with your accountant as soon as you have a query, or even putting together a “cheat sheet” with your accountant for regular transactions. You can ask your accountant to check your quarter’s transactions before they file your VAT return.
Banish your banking backlog
If you’re uploading your bank transactions, it’s easy to miss out a week or a month.
Without these transactions, you won’t have complete information about how your business is doing, and you could pay the wrong amount of tax.
How to exorcise this ghost:
Double-check that you’ve uploaded, or manually entered, all of your transactions.
If you’re using FreeAgent you can also set up automatic bank feeds, so that your transactions pull through into your accounts with little or no effort required on your part.
Resurrect buried expenses
If you travel on business, you will almost certainly spend some of your own money on business costs while you’re out and about, such as a train ticket or car parking. Do you always remember to include those expenses in your accounts, or are they buried under paperwork on your desk? They may feel like small amounts, but we’ve found that one third of small business expenses are under £10. These small amounts could total to a big portion of your expenses, but many small business owners don’t record them, and so can’t benefit from any tax relief.
How to exorcise this ghost:
Send that ghost packing by setting aside some time to go through the pile of receipts in your wallet or purse and posting those which relate to your business costs into your accounts. Don’t forget that your accounting software may let you do this using your mobile phone!
You can keep this ghost away in the future by posting your receipts into your accounts as soon as you incur them. Your smartphone is the ideal tool to use here. Why not make use of the time you spend on the platform waiting for your train, by photographing your ticket and recording the journey in your accounts? That way, if the barrier at the other end swallows your ticket, you have proof of the journey already tracked, to show to HMRC.
Remember that your accountant is also your best friend in this fight against the ghosts in your books. Enlist their help as a ghostbuster, to make sure they never return! A ghost-free set of books gives you accurate timely information to help you make the best choices about your business’s future.
Emily Coltman FCA is Chief Accountant to FreeAgent, who provide a multi award-winning online accounting system specifically designed for small businesses and freelancers. Try it for free at www.freeagent.com
Image: Halloween via Shutterstock
