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10 Most Common Mistakes Made by SME Owners

Running a small or medium-sized enterprise (SME) can be a rewarding endeavour, but it's not without its challenges. Among these challenges are common mistakes that SME owners often make. Here are some of the most frequent errors and oversights:

  1. Withdrawing Funds Without Proper Payroll Processing: One common mistake is withdrawing money from the business bank account without first processing payroll and submitting Real Time Information (RTI) to HM Revenue & Customs (HMRC).

  2. Taking Loans from the Company: Another pitfall is taking loans from the limited company, which can result in a higher tax burden for the company, typically at a rate of 33.75%.

  3. Mixing Personal and Business Finances: Using personal bank accounts or cards for business transactions, such as collecting receipts or making payments, can lead to confusion and complicate accounting processes.

  4. Lack of Mileage Tracking: Failing to maintain a mileage log for personal vehicles used for business purposes can result in missed opportunities to claim mileage allowances.

  5. Neglecting to Record Personal Expenses: SME owners should diligently record any business expenses paid from personal accounts, particularly those made in cash, to ensure accurate financial records.

  6. Misusing Business Funds: Using business credit cards for personal expenses, such as department store purchases, fuel, or dining out, can blur the lines between personal and business finances.

  7. Poor Cash Expense Management: Failure to keep records of business expenses paid in cash can lead to discrepancies and difficulty in tracking expenditures.

  8. Incorrectly Filing Dormant Accounts: Submitting dormant accounts to Companies House when the company was actually active can result in compliance issues and penalties.

  9. Not Updating HMRC on Trading Status: Failing to inform HMRC about changes in the company's trading status can lead to penalties, especially if tax returns are not filed accordingly.

  10. Hiring Staff Without Proper Registration: Employing staff without registering the company with HMRC can lead to legal and tax compliance issues.
Avoiding these common pitfalls requires diligence and attention to detail. By staying organized and informed, SME owners can navigate the complexities of running a business more effectively.
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