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The orders are flooding in, your customers love you, your desk a forest of Christmas cards from suppliers and partners. Yet your business could still be sinking. Why? Because of the quiet, everyday finance mistakes that quietly drain cash and undermine stability.
A handful of common accounting slip-ups are costing business leaders far more than they realise. The good news is, they’re all fixable. Here’s how to spot and stop the leaks today.
Admit it, you’ve raised invoices at the dinner table and reconciled bank accounts at weekends. You may think “it’s my time so it doesn’t matter”. In reality, it’s a hidden tax on growth.
Simon Swan is a serial entrepreneur, who is currently building wellness brand Uthful. “If I’m spending hours wrestling with HMRC forms, generating invoices, reconciling accounts, applying for VAT or whatever, it takes me away from building the business,” he says. “I also find it saps my creativity.”
A recent piece of Intuit research suggests that while more than two thirds of sole traders spend less than two hours a week on admin, this balloons to six to ten hours in a mid-size business – a whole working day, lost.
According to Julie Wong, a Finance Specialist, Fractional Finance Director and business mentor, a little time spent cracking the admin conundrum can save you thousands of man hours down the line. “Look at all the financial admin you do on a day-to-day basis and, for anything you do more than three times, make a process,” she advises. “Once you have a process, you can delegate or automate it.”
Swan started building these processes from day one, he reveals. “Now I’m on my third business, I’m able to avoid some of the mistakes I’ve made in the past. This time, with Uthful, I was very quick to set up accounting software and partner with an accountancy practice to support the business, primarily to reduce my admin burden and ensure everything is filed correctly.”
Every hour spent manually keying in data is an hour not spent negotiating better terms with suppliers, speaking to customers or developing new products. Multiply that by 52 weeks and you begin to see the true opportunity cost.
Many small and medium business owners still view accountants as people you call once a year to keep HMRC off your back. Research suggests this mindset is costing money.
For example, Intuit’s report found that limited financial visibility is one of the three big growth killers. As businesses expand, over a quarter of firms with 10 to 49 staff struggle to identify which parts of the business are truly profitable; that figure climbs to 38% among firms with 100 to 250 employees.
“Many business owners don’t understand the value an accountant can bring,” says Wong. “If you just ship off your accounts at the end of the year, there’s a limit to how much an accountant can help you.
“But if you build a relationship with an accountant who understands your business and industry, they will be able to advise you and derive insights from your numbers that you may not spot yourself.”
“Accountants are not just for ‘big businesses’, and going it alone can be a costly mistake,” adds David Redman, Chief Financial Officer at £15m-turnover car repair firm Rapid Repair Network. “Not only can accountants ensure everything is done by the book, and keep HMRC happy, but they can also spot tax reliefs that you might not know existed. A good accountant should always more than pay for themselves – and they are tax deductible, of course.”
Swan believes that having an accountant and accounting software are both crucial elements when building a resilient and stable business – which in turn make it more attractive to investors and acquirors. “In addition to getting set up correctly with software, processes and an accountant, I’ve also got better at ‘keeping things safe’ nowadays,” he says.
“Having been through multiple investment rounds and an exit in the past, I remember the rigour of due diligence and the importance of maintaining records and an easy-to-navigate filing system. Hence, I’ve organised Uthful’s ‘data room’ from day one, with everything filed appropriately in folders so that if I was hit by a bus tomorrow, someone could pick up where I left off and find everything easily.”
“If your business were a car, cash is the fuel that powers you forward,” says Wong. Yet cashflow is often neglected by business owners – until there’s a crisis. A crisis such as the sharp spike in costs that are being shouldered by SMEs in the UK.
“From business rates to rents to utility bills, everything has gone up,” she says. “Many of these costs – like the increase to employers’ national insurance contributions, came without warning. If you haven’t updated your cashflow forecasts, increased prices or negotiated contracts to adapt to these increased costs, cash will be running dangerously low.”
Late payments also massively impact cashflow. According to Intuit, three in five UK small businesses are currently owed money from unpaid invoices adding up to more than £21,000 each. Over half say that at least some invoices are more than 30 days overdue.
Redman says: “You can be in a good position, with work coming in and invoices going out, but still end up in trouble if you don’t keep track of when customers are paying and when suppliers are paying. Being strict with payment terms and deposits will help you stay afloat.”
Cashflow was the key reason Swan decided to build Uthful as a subscription business, selling direct to consumer and taking cash upfront, he reveals. “Finally, after 20 years running my own businesses, I’ve learned that crap cash management is a killer. Profitability on paper doesn’t always mean solvency, so having a proper rolling forecast and managing payments thoughtfully – ditto burn rate in the early days – is critical.”
“To actively manage cash, you must do a cash forecast,” advises Wong. “Don’t make decisions based on where you are now but forecast ahead, taking into account the possibility you may lose a key customer or that someone will pay late. Ration your resources so you are only spending what you need to ensure the business succeeds.”
Tax is the area where “I’ll sort it later” becomes truly expensive. According to Intuit, the average total cost of tax penalties across SMEs comes in at just over £11,000.
“Corporation tax, VAT, PAYE – it’s a lot to keep straight, but rushing tax returns and getting them wrong, or burying your head in the sand and not filing on time can have long-term and damaging effects,” says Redman. “Mistakes and filing late are exactly the sort of thing that lead to costly HMRC investigations – it’s far cheaper to get an accountant first, than to get investigated and have to pay thousands to an accountant at that point!”
According to Wong, if you’re filing late, you’re not just risking a ticking off from HMRC – it means you’ve lost sight of your numbers. “If your year runs from January to December, and you’re looking at your accounts for the first time in September, your information is 21 months out of date,” she explains. “This means you have been driving your business, blind, for all that time. The compounding effect of a bad decision, or failure to double down on a good decision over that kind of time frame is considerable!”
She recommends that business owners look at their accounts monthly – quarterly at the very least. “Looking at your numbers regularly is like building muscle memory,” she says. “Scan and input invoices and expenses every week – don’t let it all pile up. You know what they say about housework? That we should do ten minutes of cleaning at the end of each day and save a big job at the end of the week? Updating your accounts is financial housework.”
“Opportunity cost is a huge one for founders, particularly in the early stages,” reveals Swan. For him, wasting time on admin has historically limited the growth of his companies.
“Opportunity cost is the cost of making one decision over another one,” explains Wong. “It can be financial or non-financial benefits when making such decisions when there is limited resources, time, materials or cash. For example, when hiring a new team member, you can choose to hire a more expensive experienced individual vs a more junior role who is cheaper but requires training. Or perhaps launching one product line vs another one. What is the cost to the business in terms of costs and lost future value? Using opportunity cost evaluation, challenges decision making, increasing the effectiveness of the decision.”
According to Redman: “One of the biggest mistakes is not to count the opportunity cost when it comes to doing your own accounting. If you’re spending hours wrestling with spreadsheets, those are hours that you’re not putting into the business. Your time has a price tag, and it’s often higher than what paying for financial management costs.”
These stats are a useful mirror for any founder who suspects they’re spending too much time in the books and not enough time on the business. With 317,000 new businesses launched in 2024 and 280,000 shutting down in the same year, according to the ONS, the line between survival and failure is thinner than ever.
So there’s a lesson here. Automate the boring bits. Let your accountant help share the burden. Your future self – and your balance sheet – will thank you.
