The danger of DIY bookkeeping for sole traders

If you run your own business as a sole trader, it’s tempting to do your own bookkeeping to save money. But this can be a big mistake. While it’s possible to do the work yourself, if you’re not careful it could make things much harder.  And could even expose you to significant financial risk in the future if you don’t follow the right rules.

Let’s explain the danger of DIY bookkeeping for sole traders.

It’s easy to make mistakes

Self-bookkeeping can be dangerous, especially if you are a sole trader. It’s easy to make mistakes, overlook things, or use the wrong terminology. Our clients often make the following mistakes when doing their own bookkeeping:

• Recording duplicate transactions – this will cause your accounts to be in error!
• Forgetting to save receipts – you won’t have a clear record of transactions without receipts!
• Late payments being ignored – chasing up late payments is time consuming. Then people tend to forget the client never paid.
• Not accounting for tax – transactions and invoices must include tax.
• Using the wrong account for recording transactions – once you enter a transaction, it can be difficult to go back and change it to another account.
• Combining personal and business expenses – you need to clearly know what can be claimed on a tax return.
• Submitting close to the deadline – you need time to review everything is correct!

If you want to avoid the danger of DIY bookkeeping for sole traders, then you should arrange a consultation with our team, who can review or help you submit your bookkeeping.

You could miss out on important deductions

If you’re a sole trader, doing your own bookkeeping means that business expenses to save money could be missed. For example, you might have made a significant purchase; like buying a new computer and not have recorded it in your books because you don’t think it’s deductible. However, if it’s used to generate income then the expense may be deductible after all.

When you do your own bookkeeping, it’s important to keep detailed records of your expenses. This includes receipts as well as any invoices so that they are easier to find when preparing taxes. Additionally, if you live in an area where sales tax is charged on most goods and services, these will need to be recorded carefully as well so that businesses can get back the money they paid out in taxes from purchases they made.

It takes up a lot of time

Bookkeeping takes up a lot of time, as everything needs reviewing. It can feel like you are tied to the computer, and it’s hard to find time to do anything else. And while many people enjoy the challenge of juggling all of their own finances; bookkeeping can be a difficult task to manage on your own. If you’re a sole trader, it’s worth considering getting some help from us with your books.

You might not stay compliant

When choosing to complete your own bookkeeping you’re responsible for the accuracy and completeness. The process can be confusing and time consuming. Most importantly, it is illegal to complete your own bookkeeping without being compliant with all necessary regulations. You may think you’re doing everything correctly and staying compliant. But you could be putting your business at risk by not going through the right channels.

It is important to understand which regulations apply to your specific business model, as well as the penalties that come along with any missteps. If you are a sole trader and are interested in learning more about how you can stay compliant while completing your own bookkeeping, we recommend speaking to our team of accountants who can help guide you through this process. Let’s help you avoid the danger of DIY bookkeeping for sole traders.

It’s better to outsource to a professional

If you’re a sole trader, it’s best to outsource bookkeeping to a professional. Doing it yourself, bookkeeping is time consuming and difficult to manage, but outsourcing the task will save you money in the long run. Outsourcing bookkeeping doesn’t have to be expensive either – there are plenty of packages available to suit every client.

Contact us today and arrange an initial consultation – in this meeting, you’ll be given a personalised offer and the opportunity to take a package that will meet your requirements.

How RHJ Accountants can help

We recognise more than ever that individuals and businesses from the UK and other countries may be globally mobile. We aim to make you aware of the tax-efficient opportunities, available tax relief and structure finances for life at home and abroad.

Our international team of specialists operate from offices in the UK and Portugal. We work together synergistically to provide tax efficient solutions to our clients to help them grow their business whilst keeping tax liabilities to a minimum.

Get in touch with us today to find out more, or to make use of our services.