Micro-businesses struggle with expenses

UK MICRO-BUSINESSES are more likely to make mistakes with their expenses than in any other part of their financial management, according to research from online accounting system provider FreeAgent.

In a poll of 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.

Accountants said they regularly have to clarify the guidelines for expenses as many micro-businesses struggle to understand what they can and cannot claim. Around 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. Meanwhile, 24% said the biggest area for mistakes was micro-business owners failing to claim back expenses that actually were permissible.

In addition, a third 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.

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.