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Accountants reveal that micro-businesses are stumped by expenses

6th Oct 2015
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Award-winning accounting software for small business owners and their accountants and bookkeepers.

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Accountants find that UK micro-businesses are more likely to make mistakes with their expenses than in any other part of their financial management, according to new research.

In a poll commissioned by award-winning cloud accounting provider FreeAgent among accountants who work with micro-business clients, more than half of respondents (53%) said that expenses was the most common area where these clients made mistakes in their accounts.

The survey suggests that accountants regularly have to clarify the guidelines for expenses as many micro-businesses don't understand what they can and can't claim. 29% of accountants said that trying to claim back expenses they weren’t entitled to claim was the area where micro-businesses made the most mistakes in their accounts, while 24% said the biggest area for mistakes was micro-business owners failing to claim back expenses that actually were permissible.

In addition, 33% of respondents said that the most common area for mistakes was their micro-business clients’ bank balances - and the fact clients do not accurately record money in and out of their businesses.

In your experience, what is the most common area where micro-businesses (1-10 employees) make mistakes in their accounts?

Expenses - trying to claim back expenses they are not entitled to claim

29%

Expenses - not claiming back expenses that they are entitled to claim

24%

Bank balance - not accurately recording money in and out of their business

33%

VAT - trying to claim VAT they are not entitled to

8%

VAT - not reclaiming VAT that they are entitled to

5%

Payroll - making basic errors such as using incorrect tax codes and employee info

2%

Other

0%

Source: FreeAgent (July 2015) - All figures rounded up to nearest percentage

Ed Molyneux, CEO and co-founder of FreeAgent, said: “More than half of the accountants we surveyed said that expenses was the most common area for micro-business clients to make mistakes in their accounts, so it’s clear that this is a big issue.

“Accountants regularly have to deal with the fall out of micro-businesses trying to claim back expenses - whether it’s trying to claim back expenses that they’re not allowed to, or failing to claim expenses that are actually permissible.

“With the right tools in place, however, it’s easier to identify and deal with these issues quickly which can save a lot of time and hassle when it comes to correcting errors. Furthermore, by using a cloud system, accountants can also encourage clients to record their expenses data in a more timely and organised manner, which may reduce the chance of those mistakes happening in the first place.”

To find out more about FreeAgent visit their website or call 0800 025 3900.

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