When you’re new to the world of contracting, you’re bound to make mistakes. While some contractors might give their clients too much power, others will under-charge for their services or fail to come up with a productive schedule. Successful self-employment typically involves a significant learning curve, and you’ll only get stronger as your experience grows.
However, when it comes to managing your accounts, any mistakes can quickly prove incredibly damaging. Unfortunately, such is the complexity of modern business financing, these mistakes are incredibly easy to make, inevitably leading to unexpected penalties from HMRC and, more importantly, reduced income.
Of course, this is why so many self-employed workers are now seeking out the services of specialist contractor accountants and hoping to relieve themselves of the increasing pressures of financial responsibility. But what are the most common accounting mistakes, and how can a specialist accountant help?
Missing Important Deadlines
When it comes to filing your tax returns, claiming expenses and filling out your Self-Assessment forms, there’s obviously a huge number of deadlines to be aware of. When you’re concentrating so much on growing your client base and completing your workload, it’s incredibly easy to lose track of these dates and miss something vitally important.
Typically, failing to meet one of these deadlines will result in a fine and loss of income, two things every freelancer could really do without. Fortunately, a contractor accountant helps you to keep track of all of your finances, meaning that you never have to worry about staying on top of deadlines or receiving any damaging penalties.
According to the most recent government data, HMRC received over 93% of all Self-Assessment forms on time this year. However, that still leaves almost 7% who managed to miss the deadline and now face a fine from HMRC, equating to around 700,000 people.
Failing to Keep Important Documents
There’s so much paperwork involved with business finances, at times you’ll feel unsure of which documents you need to file away. Although some freelancers endeavour to keep old of absolutely everything (Including shoeboxes full of receipts) it’s only natural that a large number of these files will inevitably get lost. Of course, when you fail to keep adequate financial records, managing your cash flow can become almost impossible.
In addition, you won’t be able to claim allowable expenses when you haven’t kept hold of all your business receipts, while poor bookkeeping also means you can’t submit accurate information to HMRC. When that happens, you aren’t just putting yourself at risk of a hefty penalty, but more serious cases of negligence could actually lead to prosecution.
Whether you decide to hire an accountant or not, the most important responsibility of every contractor is to make sure your financial records are squeaky clean and up to date.
Filling Out Forms Incorrectly
Working for yourself might mean you have the luxury of being your own boss, but it also means you’ll have an awful lot on your plate. From delivering your services to networking for your next contract, you’ll always feel a little pressed for time when running your own business. Inevitably, this sheer amount of responsibility can lead to a missed character or incorrect figure on one of your tax forms.
Unfortunately, these mistakes can again lead to penalties from HMRC, although the severity of these penalties will depend largely on whether they believe you’ve made an honest mistake or purposefully attempted to mislead them. When you’ve got an expert accountant assisting you with all of the paperwork, however, you can completely eradicate the risk of any unfortunate mistakes.