5 Accounting Mistakes Most Small Businesses Make (And How to Avoid Them)

When you start a small business, you’re likely wearing all the hats, the CEO hat, the HR hat, and yes, even the Accountant hat. But here’s the truth: accounting errors are like potholes, easy to hit and expensive to fix.

Below are five of the most common accounting mistakes I’ve seen trip up business owners, and more importantly, how to dodge them like a pro.

1. Mixing Business and Personal Finances

This is the financial equivalent of mixing your laundry colours and whites. It's all fine until everything turns pink.

Having one bank account for everything might feel easier, but it creates chaos when you try to figure out what was business and what was personal. It also makes HMRC a lot less forgiving if they ever come knocking.

Why it matters:

• It’s harder to track what you’ve actually spent on your business.

  
  

• You could end up underclaiming valid expenses or overclaiming personal ones.

  
  

• You risk fines, stress, and wasting time cleaning up the mess later.

  
  

The fix: Open a separate business bank account from day one. Even if you’re a sole trader.

Use accounting software (or a good accountant 😏) to categorise your spending.

2. No Cash Flow Forecasting

“Profit” might look good on paper, but it won’t help you make payroll if your cash is locked up in unpaid invoices.

Too many business owners fly blind on cash flow thinking as long as they’re selling, they’re safe. Then tax bills, supplier payments or quiet months catch them off guard.

The danger:

• Missing a tax payment or supplier bill damages your reputation.

  
  

• You can’t invest in growth if you don’t know your cash position.

  
  

• Running out of money is one of the top reasons SMEs fail.

  
  

What to do instead: Build a simple cash flow forecast. It doesn’t need to be fancy – just look 3–6 months ahead at what’s coming in and going out. Or speak to an accountant (like us!) who can build it for you and update it monthly.

3. Delaying Bookkeeping and Filing

We’ve all told ourselves, “I’ll sort the receipts later.” The problem is “later” turns into a pile of paperwork, missed VAT deadlines, and panic in January.

The pain points:

• You forget what transactions were for

  
  

• You miss allowable deductions

  
  

• Late filing leads to penalties, avoidable ones!

  
  

Better approach: Schedule time weekly (yes, weekly!) or hire someone who’ll stay on top of it. Automation tools or cloud software help but only if they’re used consistently.

4. Not Reviewing Financial Reports Monthly

Your profit and loss report isn’t just for your accountant. It’s your business’s dashboard. If you’re only checking once a year, you’re missing out.

Why it’s a problem:

• You don’t spot slow months or rising costs

  
  

• You miss opportunities to cut overheads or upsell services

  
  

• You’re basing big decisions on guesswork

  
  

Smart solution: Set up monthly management accounts. They’re like your business’s health check, helping you grow smarter, not harder.

5. Doing It All Yourself

Look, we get it. It’s your business baby. But trying to juggle numbers, taxes, and invoices on top of everything else is a fast track to burnout (and expensive mistakes).

Real-life example: One client we helped was doing it all – sales, delivery, accounting. After missing a few deadlines and nearly overpaying on VAT, they brought us in. Within 3 months, they had accurate monthly reports, stress-free filings, and reclaimed £6,000 in overpaid tax.

Your move: You don’t need a full-time finance team. But you do need someone who knows the ropes. That’s where a part-time finance partner (like Jones Financial Accountants 😉) comes in.

In Summary: Small businesses can avoid big headaches by tightening up on these five areas:

• Keep finances separate

  
  

• Forecast your cash

  
  

• Stay on top of bookkeeping

  
  

• Read your reports

  
  

• Ask for help early

  
  

Let us be the finance partner who helps you avoid these mistakes – and grow with confidence.

Wrapping up today’s insights, tomorrow we simplify another accounting challenge