Getting your small business finances right: mistakes to avoid and solutions that work

Running a small business comes with enough challenges without financial mistakes adding extra stress. Yet, so many business owners find themselves struggling with bookkeeping, tax deadlines, and cash flow, often without realising how simple changes can make a big difference.

The good news? Most financial mistakes are avoidable, and even the ones that have already happened can often be fixed. Here are five of the most common mistakes small business owners make and what you can do to stay on track.

1. Mixing personal and small business finances

The mistake:

When you’re first starting out, it might seem easier to run everything from one bank account. But before you know it, you’re paying for business expenses with your personal card and vice versa. This makes it harder to track spending, manage cash flow, and calculate what you actually owe in tax.

The fix:

Open a separate business bank account as soon as possible. Even if you’re a sole trader, having a dedicated account for your business transactions makes record-keeping so much easier. You’ll get a clearer picture of your income and expenses, making tax time far less stressful.

🔹 Bonus tip: If you want to take it a step further, consider using a business credit card for expenses. This can help with cash flow while keeping spending separate.

2. Letting bookkeeping pile up

The mistake: 

Many small business owners only look at their books when it’s time to file their tax return. By then, receipts are missing, transactions are forgotten, and it’s a scramble to get everything in order. Poor bookkeeping doesn’t just mean tax-time stress, it can also lead to missed deductions or overpaying tax.

The fix:

Make bookkeeping a regular habit. Set aside 30 minutes a week to update your records, categorise expenses, and reconcile transactions.

🔹 Bonus tip: Use accounting software like Xero, QuickBooks, or FreeAgent. Many of these tools link to your bank account and automatically track transactions, saving you time and reducing errors.

3. Missing tax deadlines and paying penalties

The mistake: 

Forgetting tax deadlines is a costly habit. HMRC penalties for late tax returns and payments start immediately and get worse over time. Even if you file on time but miss payments, you’ll be charged interest on what you owe.

The fix: 

✅ Know your deadlines. If you’re a sole trader or limited company, your tax return deadline is 31st January (for online self-assessments). Corporation tax deadlines vary, so check your specific dates. 

✅ Set up reminders. Add tax deadlines to your calendar with alerts at least one month in advance. 

✅ Make payments early. If cash flow allows, pay a little ahead of time to avoid last-minute surprises.

🔹 Bonus tip: If cash flow is tight, HMRC offers Time to Pay arrangements, allowing you to spread tax payments over time.

4. Not claiming all allowable expenses

The mistake:

So many business owners pay more tax than they need to simply because they don’t realise what they can claim. Every missed expense is money out of your pocket that could have been reinvested into your business.

The fix: 

Familiarise yourself with what expenses you can claim, such as: 

✔️ Office costs - Rent, utilities, internet, and phone bills. 

✔️ Travel expenses - Fuel, public transport, and accommodation for business trips. 

✔️ Marketing & advertising - Website costs, paid ads, business cards. 

✔️ Professional fees - Accountant fees, training courses, and professional memberships.

Keeping good records is key. Use a receipt-scanning app or accounting software to log expenses as they happen.

🔹 Bonus tip: If you work from home, you can claim a portion of your household bills based on the amount of time and space used for business.

5. Not planning for cash flow fluctuations

The mistake:

One of the biggest risks for small businesses isn’t lack of sales, it’s cash flow problems. Even profitable businesses can struggle if they don’t have enough cash in the bank to cover bills and payroll.

The fix: 

✅ Have a buffer. Aim to keep at least 3 months’ worth of business expenses in your account for emergencies. 

✅ Forecast your finances. Monitor expected income and upcoming expenses so you’re never caught off guard. 

✅ Get paid faster. If clients are slow to pay, consider offering early payment discounts or switching to automated invoicing systems to chase payments for you.

🔹 Bonus tip: If your business has seasonal ups and downs, plan for the quiet periods by saving extra when cash flow is strong.

You don’t need to be perfect to avoid financial mistakes, you need to be prepared

Mistakes happen, but the key is learning from them and implementing better systems. Small changes can make a big difference, whether it’s organising your bookkeeping, planning ahead for tax deadlines, or making sure you’re claiming everything you’re entitled to.

At Evolve Accounting, we help small business owners take control of their finances without the stress.

📢 Need help getting your finances in order? Let’s chat.

 📞 Call 01480 775 611 

💻 Visit www.evolveaccounting.uk