Top 10 Accounting Mistakes New Bedford Businesses Make (and How to Avoid Them)

When someone starts a business, they are usually focused on getting customers, building a website, launching their service, or setting up their shop. The financial side tends to be an afterthought until something goes wrong or until a deadline suddenly appears. That is completely normal. Nobody starts a business because they are passionate about tax returns or bookkeeping.
However, the way you set up your finances at the beginning will shape your entire first year. I have met too many Bedford business owners who made innocent mistakes early on and spent months sorting them out later.

The aim of this article is simple. I want to show you the mistakes I see weekly so you can avoid them and give your new business the strongest start possible.

1. Not separating personal and business finances

This is the most common mistake. New business owners often use their personal bank accounts for business spending. It feels convenient at first, but it creates chaos when:

• You try to claim expenses
• You need to prepare accounts
• You want to apply for a mortgage or loan
• HMRC asks for evidence

Your business should have its own bank account from day one. This keeps your records clean, your bookkeeping simple and your tax position clear.

2. Doing your bookkeeping once a year instead of monthly

I can spot a once a year bookkeeper instantly. Receipts are missing, transactions are duplicated and VAT codes are all over the place.
Bookkeeping must be done monthly because:

• VAT returns rely on accurate records
• You need to know your profit for dividend decisions
• You cannot fix twelve months of mistakes in one go

If you leave everything to the end of the year, you risk overpaying tax and missing claims.

3. Not registering for VAT at the right time

New Bedford businesses often miss the VAT threshold because they monitor turnover annually instead of on a rolling twelve month basis. HMRC expects you to register as soon as you exceed the threshold. Missing this leads to:

• Backdated VAT
• Penalties
• Interest
• Awkward conversations with customers

This is a painful mistake that I fix often. Monitoring turnover monthly prevents it.

4. Paying yourself incorrectly as a director

Many new limited company owners do not understand the difference between salary, dividends and drawings. I see directors who:

• Take random payments
• Withdraw money without profit
• Mix personal and business use
• Accidentally create an overdrawn Director’s Loan Account

These mistakes can create serious tax issues. A director should always have a clear salary and dividend plan. This is not something to guess your way through.

5. Forgetting to record expenses properly

Receipts stuffed into glove boxes, screenshots lost on phones, Amazon purchases mixed with personal orders. I can always tell when someone has not been taught how to record expenses.
Missing receipts means missing tax deductions. For a new Bedford business, that money matters.

A simple process such as photographing receipts into software like Xero or QuickBooks keeps everything clean and stress free.

6. Not understanding allowable expenses

Another problem I see often is new business owners either overclaiming or underclaiming because they simply do not know the rules.

Some people claim:

• Personal meals
• Clothing that is not protective
• Home improvements

Others claim far too little and miss out on:

• Mileage
• Home office use
• Software
• Professional fees
• Essential tools

The correct list sits somewhere in the middle and your accountant should explain it clearly.

7. Using the wrong business structure

Some Bedford business owners stay as sole traders when they should switch to a limited company. Others incorporate too early when they would have been better remaining self employed for a while.

The wrong structure affects:

• How much tax you pay
• Your ability to take dividends
• Whether you can attract investors
• How lenders view you
• Your exposure to risk

A quick conversation with an accountant at the start prevents years of unnecessary tax.

8. Not planning for tax bills

New businesses often assume they can deal with tax when the time comes. Then January arrives and they are shocked by the amount owed.
Tax planning is not complicated. It is simply:

• Knowing your likely bill
• Putting aside a percentage of income
• Reviewing profits quarterly

New Bedford business owners often skip this step and end up stressed when the first bill arrives.

9. Choosing the wrong accountant or none at all

Some people think they will save money by skipping the accountant for the first year. In reality they usually spend more fixing mistakes than they would have spent on proper advice. Others choose an accountant based on price rather than service and end up with:

• Poor communication
• No tax planning
• Wrong filings
• Missed allowances

If your accountant never contacts you, never reviews your salary and dividends, and never explains your tax, then you are not getting what you need.

10. Not using accounting software correctly

Accounting software is powerful, but it is not magic. It does not know if you have selected the wrong category or wrong VAT code. It does not plan your tax. It does not warn you if you take illegal dividends. It only records what you tell it.

I have seen “perfect looking” software files that were completely wrong behind the scenes.
Software should support your business, not run it for you.

Why these mistakes matter more than new business owners realise

When you are just starting out it is easy to underestimate the consequences of simple financial mistakes. But each one adds up. One missed VAT registration can cost thousands. One wrong dividend can trigger extra corporation tax. One messy set of books can ruin your chance of getting a mortgage. One ignored tax bill can lead to penalties.

These mistakes are avoidable, and fixing them early shapes the financial future of your business.

How to avoid all ten mistakes at once

You avoid them by creating a very simple setup:

• A clean business bank account
• Accounting software
• Monthly bookkeeping
• Clear salary and dividend planning
• A proper record keeping system
• VAT and tax monitoring
• Advice from someone who understands you

It does not have to be complicated. You do not need to become a tax expert. You just need clarity, structure and support.

How Towerstone Helps Bedford Startups

At Towerstone we work hand in hand with Bedford businesses to make sure none of these mistakes happen in the first place. We do not offer weekend or in person evening appointments, but we do speak with clients during early evenings when needed because support matters when you are running a business.

We take new businesses through:

• Setup
• Structure
• Bookkeeping
• VAT
• Payroll
• Tax planning
• Year end
• Dividends and salary
• Avoiding Director’s Loan Account issues

Most new clients tell us they wish they had come to us sooner because they finally feel organised and confident.

The Bottom Line for New Bedford Businesses

Starting a business is challenging enough without falling into avoidable financial traps. These ten mistakes are incredibly common, but every single one of them can be prevented with the right setup and guidance. Running your business should feel exciting, not stressful. The cleaner your financial foundation, the easier everything else becomes.